Israel and Hamas have struck a last-minute agreement to extend their ceasefire for a seventh day, and Washington hopes the truce can be extended further to free more hostages and let aid reach Gaza.
The truce has allowed much needed humanitarian aid into Gaza after much of the coastal territory of 2.3 million people was reduced to wasteland by seven weeks of Israeli bombardment in retaliation for a deadly rampage by Hamas militants on October 7.
Morning broke over northern Gaza's war zone on Thursday, quiet for the seventh day as seen from across the fence in Israel, although a deadly shooting in Jerusalem was a potent reminder of the potential for violence to spread.
Israel, which has demanded Hamas release at least 10 hostages a day to keep the ceasefire going, said it received a list at the last minute of those who would go free on Thursday, allowing it to call off plans to resume fighting at dawn.
"In light of the mediators' efforts to continue the process of releasing the hostages and subject to the terms of the framework, the operational pause will continue," the Israeli military said in a statement released minutes before the truce was due to expire at 7am (4pm AEDT).
Hamas, which freed 16 hostages on Wednesday while Israel released 30 Palestinian prisoners, also said the truce would continue for a seventh day.
US Secretary of State Antony Blinken, who was visiting Israel, said efforts were continuing to prolong the truce.
"We have seen over the last week the very positive development of hostages coming home, being reunited with their families. And that should continue today," he said during a meeting with Israeli President Isaac Herzog.
"It's also enabled an increase in humanitarian assistance to go to innocent civilians in Gaza who need it desperately. So this process is producing results. It's important, and we hope that it can continue."
So far militants have released 97 hostages during the truce: 70 Israeli women and children, each freed in return for three Palestinian women and teenage detainees, plus 27 foreign hostages freed under parallel agreements with their governments.
With fewer Israeli women and children left in captivity, extending the truce could require setting new terms for the release of Israeli men, including soldiers.
Shortly after the agreement, Israeli police said two Palestinian attackers opened fire at a bus stop during morning rush hour at the entrance to Jerusalem, killing at least three people.
Both attackers were "neutralised by security forces and a nearby civilian", police said.
The conditions of the ceasefire, including the halt of hostilities and the entry of humanitarian aid, remain the same, according to the Qatar foreign ministry.
Qatar has been a key mediator between the warring sides, along with Egypt and the United States.
Hamas had earlier said Israel had refused its offer to hand over seven women and children plus the bodies of three others.
It did not name the dead but said on Wednesday the youngest hostage, 10-month-old Kfir Bibas, had been killed along with his four-year-old brother and their mother in an Israeli bombardment, a claim Israel said it was checking.
Israel has sworn to annihilate Hamas, which rules Gaza, in response to the October 7 rampage by the militant group, when Israel says gunmen killed 1200 people and took 240 hostages.
Until the truce, Israel bombarded the territory for seven weeks.
Palestinian health authorities deemed reliable by the United Nations say more than 15,000 Gazans have been confirmed killed, about 40 per cent of them children.
A further 6500 are missing, many feared still buried under rubble.
Two-thirds of Gazans are homeless, most of them sheltering in the south after Israel ordered the complete evacuation of the northern half of the tiny coastal strip.
Once the truce is over, Israel is expected to extend its ground campaign into the south.
The United States, which has strongly backed its ally, was urging Israel to narrow the zone of combat and clarify where Palestinian civilians could seek safety during any Israeli operation in southern Gaza, US officials said on Wednesday, to prevent a repeat of the massive death toll.
Australian Associated Press