Israel has sent reserve units into Gaza to help thousands of ground forces already in the territory, and fighting has persisted despite a U.N. Security Council resolution calling for a cease-fire. Egypt has assumed a role as mediator between Israel and Hamas.

Talks "are progressing slowly but surely because each party wants to score some points," Hossam Zaki, the spokesman for Egypt's Foreign Ministry, told the British Broadcasting Corp. "We would like to be able to bridge some gaps and then proceed immediately to a cease-fire."

Zaki, however, said Egypt could not provide certain guarantees that Israelis seek, such as a halt to rocket fire.

"We'll enhance our efforts, but this is not an issue between Israel and Egypt," Zaki told the BBC. "It is an issue between Israel and Gaza, and this is something that will have to be worked out, as the (U.N.) Security Council says, in Gaza."

Much of the diplomacy focuses on an area of southern Gaza just across the Egyptian border known as the Philadelphi corridor that serves as a weapons smuggling route, making Egypt critical to both sides in any deal. The name of the corridor is an Israel military label.

Israel wants those routes sealed and monitored as part of any peace deal, and has been bombing tunnels that run under that border.

"I think the elements of an agreement for the immediate cease-fire are there," Blair said in Cairo. He added that, while more work needed to be done, he hoped to see a cease-fire "in the coming days."

Israeli Defense Ministry official Amos Gilad planned to travel Tuesday to Egypt for talks.

In Paris, French Foreign Minister Bernard Kouchner said European military observers should be sent to Gaza to monitor any eventual cease-fire.

Israel's chief military spokesman, Brig. Gen. Avi Benayahu, said the fighting was "difficult and complex" and that Hamas militants were setting boobytraps and firing missiles from the rooftops of civilian homes.

"There is a whole city built underground in Gaza. Lots of big weapons warehouses," Benayahu said. Soldiers also uncovered a tunnel dug inside Gaza that led 300 yards into Israel, he said.

In Monday's fighting, the army said it carried out more than 25 airstrikes, hitting squads of gunmen, mortar launchers and two vehicles carrying Hamas militants.

It said ground troops came under fire from militants in a mosque. An Israeli aircraft attacked the squad, and Israeli troops then took over the mosque, confiscating rockets and mortar shells.

With Israeli troops surrounding Gaza's main population centers, Israeli leaders have said the operation is close to achieving its goals. Security officials say they have killed hundreds of Hamas fighters, including top commanders, but there has been no way to confirm the claims.