Prime Minister Benjamin Netanyahu says Israel has “no choice” but to step up its air strikes on Gaza, after an Egyptian truce initiative failed to halt militant rocket attacks on Israel.
“When there is no ceasefire, our answer is fire,” Mr Netanyahu said.
Hamas, which controls Gaza, has not responded officially to the initiative. Its military wing has rejected it.
Palestinian officials say Israeli raids have killed 194 people. Israel on Tuesday reported its first fatality.
Israel launched its Operation Protective Edge eight days ago to try to halt the rocket attacks.
PM ‘a failure’
The Egyptian-backed truce was to have started at 09:00 (06:00 GMT).
Israel’s security cabinet approved it and operations were halted for six hours.
However, Israel then resumed its attacks on Gaza, saying militants had continued to fire dozens of rockets.
Mr Netanyahu said: “This would have been better resolved diplomatically, that’s what we tried to do when we accepted the Egyptian truce proposal.
“But Hamas leaves us no choice but to expand and intensify the campaign against it.”
One senior Hamas spokesman, Osama Hamdan, told the BBC it had only heard about the truce initiative through the media and that a ceasefire could not be put in place without the details of any agreement being known.
The armed wing of Hamas, the Izz al-Din Qassam Brigades, dismissed the initiative, saying its battle with Israel would “increase in ferocity and intensity”.
Under the terms of the Egyptian initiative, the ceasefire should have been followed by a series of meetings in Cairo with high-level delegations from the two sides.
One of the key desires of Hamas would be the easing of a blockade enforced by Israel since 2007, causing severe economic hardship.
Moussa Abu Marzouk, a top Hamas official, said no final decision had been taken on the Egyptian initiative.
But he told Lebanese TV: “The siege on Gaza must be broken and the people of Gaza should live freely like other people of the world.”
Another Hamas leader in Gaza, Mushir al-Masri, told Associated Press that mediators and international guarantees would be needed for any deal to work.
Mr Netanyahu had come under fire in Israel for accepting the truce initiative.
But he said on Tuesday evening: “These are moments when decisions must be made coolly and with patience, not hastily or noisily.”
Mr Netanyahu’s office announced that deputy defence minister Danny Danon had been sacked for comments branding the PM a “failure”.
“It is inconceivable that the deputy defence minister will attack the country’s leadership leading the campaign,” a statement read.
Israel has mobilised tens of thousands of troops on the border with Gaza amid speculation a ground invasion could be launched.
Israeli defence official Amos Gilad said: “We still have the possibility of going in, under cabinet authority, and putting an end to [the rockets].”
US state department spokeswoman Jen Psaki said Israel had the right to defend itself, but added that “no-one wants a ground war”.
“Our effort remains focused on seeing if we can return to a ceasefire,” she said.
The Israel Defense Forces said militants had fired more than 140 rockets into Israel on Tuesday, and more than 1,100 in the past eight days.
A 38-year-old Israeli man was killed by a mortar shell fired from Gaza near the northern border with Israel, reports said.
At least two Palestinians were killed in Israeli raids, Palestinian officials said.
The UN Relief and Works Agency for Palestine refugees (UNRWA) said on Tuesday that hundreds of thousands of Gazans were without water following the Israeli air strikes and that 560 homes had been destroyed.