Negotiations were mediated by Egypt, and last month Hamas agreed on terms for a truce with Israel with a coalition of 12 small Palestinian factions.
On May 12, Israeli Defense Minister Ehud Barak held talks with Omar Suleiman, Egypt's intelligence chief, on the ceasefire agreement in the enclave, controlled by Hamas since June last year.
However, the Haaretz newspaper said Barak told Suleiman that any truce deal would have to include both the release of abducted Israel Defense Forces Cpl Gilad Shalit, who has been held captive by Hamas in the Gaza Strip since June 2006, and a complete cessation of rocket and terrorist attacks from the enclave.
Hamas is demanding the release of 450 Palestinian prisoners in exchange for Cpl Shalit, who was seized during a cross-border raid by Palestinian militants. The group's leader, Khaled Meshaal, said in March that Shalit was still alive and being treated well.
"We are not going to accept the new conditions. They are, in fact, a rejection of the truce we proposed," a Hamas spokesman said. Israeli terms also included demands to stop the smuggling of weapons into the Gaza Strip.
Radical Islamic movement Hamas had expressed hope that any ceasefire with Israel would eventually be extended to the West Bank.
Shortly after the meeting between Barak and Suleiman, Islamic Jihad militants launched a rocket into Israel, killing a 70-year-old woman close to the border with the Gaza Strip, security and medical services said.
