What's the endgame for Israel and Hamas in Gaza?

But Hamas continued launching rockets (17 at last count Sunday) at various cities in southern Israel on Sunday, hitting Beersheba, Sderot, and other small communities.

On Saturday night, Mashaal said Hamas would not agree to any permanent cease-fire with Israel. One aspect of the French-Egyptian proposal includes the possibility of sending in international observers, which neither Israel nor Hamas seemed keen to accept.

Mashaal, who was in Cairo over the weekend to discuss the cease-fire proposal, said that any international peacekeeping force sent to Gaza would be seen as an occupying entity. He also said that Hamas could not accept the inspection of Gaza's numerous smuggling tunnels by international observers. "The objective of the war in Gaza is to subdue the Palestinian people and to dictate its political concessions," Mashaal said.

Israeli officials reject the suggestion that they have made a decision to overthrow Hamas. But one, who requested anonymity, acknowledged that it was one of many "contingency plans" the Israeli military is weighing.

Following the weekly Sunday cabinet meeting in Jerusalem, an Israeli government spokesman said that Israel has no intention of retaking the Gaza Strip, which it occupied from 1967 to 2005. The spokesman, Cabinet Secretary Oved Yehezkel, pointed to a steep drop in the number of rockets fired from Gaza each day as a mark of Hamas's launching capabilities being curbed. There were 70 missiles a day coming into Israel at the beginning of the operation, and now there are about 20, Mr. Yehezkel told reporters.

Foreign Minister Tzipi Livni, in comments after meeting with Germany's foreign minister Sunday, indicated that Israel has all but given up on getting to any kind of an agreement with Hamas, and so it determined to radically degrade their military capabilities.

"Hamas is no longer in the same position to launch rockets at Israel," Ms. Livni said. "We're not trying to achieve an agreement on paper with Hamas, because we know that it won't be worth the paper it's written on. For the past three years, we have opened opportunities to talk with us. We said that we want recognition of Israel's right to exist and an end to attacks on Israel. But the only language they understand is violence."

In one of the fiercest ground battles so far, Israeli troops battled Palestinian gunmen in a suburb of Gaza City Sunday, the Associated Press reported. In the fighting in the Sheikh Ajleen neighborhood, Hamas and Islamic Jihad said they had ambushed Israeli soldiers.

The United Nations said it resumed on Sunday sending aid convoys into the Gaza Strip after getting assurances from the Israeli military for better coordination within Gaza.

Alleging Israeli soldiers opened fire on an aid convoy on Thursday, the UN Relief and Works Agency (UNRWA) said it was suspending all its operations in Gaza. (Food distribution continued, but supply convoys from Israel were halted.)

"We had a meeting with the coordinator for government activities in the territories, and he expressed regret," said Chris Gunness, a spokesman for UNRWA. "We are keeping a very close eye on what the [Israeli army is] doing."

But Israel's army denied charges by the United Nations that its soldiers had shot at a UN truck in a convoy ferrying humanitarian aid to Gazans. The army said the denial was based on a review of ground and air forces in the area of the shooting, which was near the Erez Crossing at the northern tip of Gaza. An army spokesman said he assumed the gunners were Palestinian.

Separately, the Israeli army admitted that the shelling of a UN school that killed dozens of Palestinian civilians this past week was the result of an errant shell that missed its target, according to Israeli media reports.

• Joshua Mitnick contributed from Tel Aviv.

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