Gilad Shalit's capture is an emotive subject for many Israelis
Israel's security cabinet has decided there will be no truce in Gaza until an Israeli soldier captured in 2006 is freed, Israel's interior minister says.
Meir Sheetrit told reporters that the cabinet had backed demands to link Cpl Gilad Shalit's release to the lifting of Israel's blockade of Gaza.
Israel has closed Gaza's borders, allowing only essential supplies in.
Leaders of the Palestinian group Hamas have said the border crossing and prisoner issues cannot be linked.
After the security cabinet meeting, Mr Sheetrit told journalists: "The security cabinet unanimously decided that the release of the soldier Shalit is a condition to any agreement with Hamas."
Sheetrit: We want Cpl Shalit back home
Cpl Shalit was seized by Palestinian militants in June 2006 while he was on duty at an Israeli base guarding a crossing into the Gaza Strip.
'Insult to Egypt'
In recent days outgoing Prime Minister Ehud Olmert has demanded the resolution of the Shalit issue before looking at "reopening the crossings and rehabilitating the Gaza Strip".
Hamas leaders have accused Mr Olmert of trying to block Egyptian-mediated truce efforts.
"This Zionist position imposes new conditions at the last minute. This completely contradicts the Egyptian and Palestinian positions," AFP news agency quoted Hamas spokesman Fawzi Barhum as saying.
Israel's security cabinet decided to back Prime Minister Olmert
Even Israel's top negotiator in the peace talks, Amos Gilad, was quoted offering outspoken criticism of the prime minister.
"Suddenly, the order of things has been changed... Where does that lead, to insult the Egyptians? To make them want to drop the whole thing?" he was quoted saying in the Maariv daily.
Hamas has demanded the release of 1,400 Palestinians detained in Israeli jails, including ones involved in attacks on Israelis who have mostly been kept out of past swaps.
Aid agencies say Gaza needs the crossings reopened to people and a much greater volume and range of goods if it is to rebuild after Israel's 22-day air, sea and land bombardment which inflicted heavy damage on the territory's infrastructure and destroyed some 5,000 homes.
The Israeli authorities believe Cpl Shalit is still alive. In the past they have been prepared to exchange hostages and the remains of soldiers for large numbers of Arab prisoners.
Meanwhile, Israel's largely ceremonial president, Shimon Peres, began consulting parliamentary leaders on Wednesday about forming a new government after close results in the 10 February general election.
"I am conscious of the serious difficulties that exist at this moment," Mr Peres told public radio, before meeting leaders from Kadima and Likud parties.
"I will do everything to allow the formation of a government that will best reflect the will of the voters," he said.
The centrist Kadima, led by Foreign Minister Tzipi Livni won 28 seats in the 120-member parliament to 27 for the conservative Likud.
Ms Livni replaced Mr Olmert as party leader. He stepped down from the post after becoming embroiled in corruption scandals. He denies wrongdoing.
Analysts say although Ms Livni came first, Likud leader Benjamin Netanyahu appears to command the largest bloc of supporters.
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