Israel and Hamas Islamists who control the Gaza Strip have been holding their fire as Egypt tries to mediate a truce, both sides said on Monday.
Israeli Prime Minister Ehud Olmert denied any agreement to halt military action against militants in the coastal enclave, but Palestinian President Mahmoud Abbas said he believed Israel would go along with a deal.
Abbas said Hamas and Islamic Jihad, the main groups in Gaza behind cross-border rocket fire at Israel, wanted assurances their leaders would not be attacked by the Jewish state.
A Gaza truce sought by the Palestinian president could be key to U.S.-brokered peace efforts but also benefit Hamas, which seized the coastal enclave in June after routing Abbas's more secular Fatah forces.
Israel has not struck in Gaza since Thursday, three days after it ended an offensive that killed 120 Palestinians.
The number of Palestinian rocket attacks on southern Israel has dropped sharply since Olmert said on Wednesday Israel would have no reason to attack Gaza if the daily salvoes stopped.
Hamas's armed wing has not itself claimed responsibility for firing any rockets since Israel wrapped up its ground and air assault. In the absence of Israeli "aggression", Hamas official Sami Abu Zuhri said the group had no cause to launch them.
"It seems that Hamas has decided for now not to shoot. And we're not shooting either," said an Israeli official, who declined to be named because of the sensitivity of the issue.
"This could well become a ceasefire. But the ball is in Hamas's court," the official said.
In new public comments on the lull, Olmert insisted Israel was not negotiating with Hamas "directly or indirectly". But in a nod to a possible de facto truce, he repeated that if rockets were not fired at Israel, "we will have no reason to shoot".
Speaking in Amman, Abbas said: "Hamas and Islamic Jihad have asked that their leaders should be protected from Israeli (attack). I think the Israelis are agreeing to this or have agreed. We may be hearing about this deal in the coming few days."
