Israel withdrew its ground forces from Gaza's border areas, and both sides halted cross-border attacks as the three-day truce took effect at 8 a.m. (0500 GMT) Tuesday. The shelling stopped and in Gaza City, where streets had been deserted during the war, traffic picked up and shops started opening doors.
If the calm holds, it would be the longest lull in almost a month of fighting that has killed nearly 1,900 Palestinians and 67 Israelis.
In coming days, Egyptian mediators plan to shuttle between Israeli and Palestinian delegations in Cairo to try to work out new arrangements for Gaza.
As details of the Palestinian demands emerged, there were some signs that Hamas, which has ruled Gaza for seven years, is willing to let its former rival, Palestinian President Mahmoud Abbas, take a lead in rebuilding the territory.
The Palestinian delegation in Cairo is led by one of Abbas' confidants, but also includes members of Hamas and other factions.
On Monday, the delegation presented a joint list of demands to Egypt, said Hana Amireh, a West Bank-based PLO official who is in touch with the delegation.
The demands include a call for internationally funded reconstruction that would be overseen by an Abbas-led government that was formed in a unity deal with Hamas before the war.
Mohammed Mustafa, the West Bank-based deputy prime minister of the technocrat government, told The Associated Press that efforts are under way to arrange a pledging conference of donor countries in Norway at the beginning of September.
International Mideast envoy Tony Blair is part of efforts to arrange that gathering in Norway, Blair's office said.
Hamas has not made any official statements but a senior Hamas official, Izzat Rishq, said late Monday that the Palestinian delegation, which includes Hamas, approved the demands handed to the Egyptians.
Israeli government officials were not available for comment. Israel TV's Channel 10 said the Israeli delegation had not yet left for Cairo. The report said Israel wanted to make sure the cease-fire held before sending negotiators to Egypt.
Gaps between the Israeli and Palestinian positions are wide, and it's not clear how much can be achieved once talks get under way.
The situation on the ground remains volatile, and any cease-fire violation could quickly derail the Cairo talks.
Any reconstruction plan would require a lifting of the Israeli-Egyptian border closure of Gaza, imposed after the violent Hamas takeover of the territory in 2007. The Palestinian delegation has told Egypt an end to the closure is key to any solution for Gaza.
Israel is concerned that Hamas would be able to restock its military arsenal if the borders are opened.
Over the years, Hamas has smuggled rockets and other weapons into Gaza through smuggling tunnels under the Gaza-Egypt border. The flow only halted after a new government in Egypt took over a year ago and destroyed the tunnels.
Israeli Prime Minister Benjamin Netanyahu has repeatedly raised the idea in recent days of disarming Hamas, with the help of the international community, but hasn't said how this could be done.
Hamas is deeply rooted in Gaza. Despite the blow to its fighting capabilities in the past month, Hamas has thousands of armed men under its command.
As Tuesday's truce took effect, residents returned to devastated areas to inspect the damage.
One of the hardest-hit areas of recent days was the southern Gaza town of Rafah, which had come several days of heavy Israeli shelling and airstrikes, starting Friday, after Israel suspected an Israeli soldier had been captured by Hamas. Israel later said the soldier was killed in battle that day.
"I never saw anything like this in my life," Tawfiq Barbakh, a 67-year-old father of 12, said of the Israeli shelling as he surveyed his badly damaged home. "I don't know how many shells landed every minute but it felt like 20 or 30."
The war broke out on July 8 when Israel launched airstrikes it said were in response to weeks of heavy rocket fire out of Hamas-controlled Gaza. It expanded the operation on July 17 by sending in ground forces in what it described as a mission to destroy a network of tunnels used to stage attacks.
The fighting has claimed nearly 1,900 Palestinian lives — many of the civilians. The war has also left 67 dead on the Israeli side, all but three of them soldiers.
An Israeli military spokesman, Lt. Col. Peter Lerner, said Tuesday that about 900 Palestinian militants had been killed by Israeli forces during the war.
In a conversation with The Associated Press on Sunday, another military official had said at least 300 militants had been killed. Asked about the sharp jump in figures over just two days, Lerner said the figure of 900 militants killed was an approximation, based on reporting from individual Israeli units, but provided no further detail.
The U.N. and Gaza human rights groups monitoring the death toll have said more than 75 percent of those killed in Gaza were civilians.
Lerner said Israel withdrew all its remaining forces from Gaza on Tuesday after troops neutralized cross-border tunnels that were built for Islamic militant attacks inside Israel.
"Overnight, we completed the destruction of 32 tunnels in the Gaza Strip," Lerner said. "They were part of a strategic Hamas plan to carry out attacks against southern Israel.
He said that over the past month, Hamas and other Gaza militants had fired some 3,300 rockets and mortar rounds at Israel. He estimated that Israeli forces destroyed another 3,000 rockets on the ground — but that Hamas has an equal number left for future use.
Lerner declined to say how many ground forces had been involved in the Israeli operation, though the military acknowledged calling up 86,000 reservists, including rotations, during the course of its Gaza operation.
Enav reported from Jerusalem. Associated Press writers Ibrahim Barzak in Gaza City and Hamza Hendawi in Rafah contributed to this report.
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