Mediator Egypt said a deal for a truce to end the fighting could be close, but the leader of Hamas said it was up to Israel to end the new conflict it had started. Israel says its strikes are to halt Palestinian missile attacks.
Twelve Palestinian civilians and four fighters were killed in yesterday's air strikes, bringing the Gaza death toll since fighting began on Wednesday to 100, more than half of them civilian, local officials said. Three Israeli civilians have been killed.
After an overnight lull, militants in the Hamas-run Gaza Strip fired 45 rockets at southern Israel, causing no casualties, police said. One damaged a school, but it was closed at the time.
Among targets struck in Gaza yesterday, Israeli missiles blasted a tower block housing inter-national media, including Sky News, for the second straight day.
One person was killed there, described by a source in militant group Islamic Jihad as one of its fighters and later named as Ramaz Harab.
Khaled Meshaal, exiled leader of Hamas, the Islamist group that rules the coastal strip, said Israel had failed to achieve its objectives.
He said a truce was possible, but Hamas would not accept Israeli demands. He added that Israel must first halt its strikes and lift its blockade of the enclave.
He said: "The weapons of the resistance have caught the enemy off guard."
"Whoever started the war must end it," he said, adding Israeli Prime Minister Benjamin Netanyahu had asked for a truce, an assertion a senior Israeli official dismissed as untrue.
Although 84% of Israelis supported the current Gaza assault, according to a poll, only 30% wanted an invasion, while 19% wanted their Government to work on securing a truce soon.
Thousands turned out on Gaza's streets to mourn four children and five women, among 11 people killed in an Israeli strike that flattened a three-storey home the previous day.
The bodies were wrapped in Palestinian and Hamas flags. Echoes of explosions mixed with cries of grief and defiant chants of "God is greatest".
The deaths of the 11 in an air strike drew more international calls for an end to six days of hostilities and could test Western support for an offensive Israel billed as self-defence after years of cross-border rocket attacks.
Israel said it was investigating its air strike that brought the home crashing down on the al Dalu family, where the dead spanned four generations. Some reports said the wrong house may have been mistakenly targeted.
Egypt, where President Mohamed Mursi has his roots in the Muslim Brotherhood, is acting as a mediator in the biggest test yet of Cairo's 1979 peace treaty with Israel since the fall of Hosni Mubarak.
Egyptian negotiators could be close to achieving a deal between Israel and the Palestinians to stop the fighting, said Mr Mursi's Prime Minister Hisham Kandil, who visited Gaza on Friday in a show of support for its people.
Mr Kandil said: "I think we are close, but the nature of this kind of negotiation means it is very difficult to predict."
Israeli media said a delegation from Israel had also been to Cairo for truce talks. A spokesman for Mr Netanyahu's government declined comment on the matter.
An Israeli official said: "Israel is ready for a ground incursion which will deal severely with the Hamas military machine.
"We would prefer to see a diplomatic solution that would guarantee the peace for Israel's population in the south. If that is possible, then a ground operation would no longer be required. If diplomacy fails, we may well have no alternative but to send in ground forces."