Israel's Prime Minister Benjamin Netanyahu (C) and Defence Minister Moshe Yaalon (L) attend a cabinet meeting in Tel Aviv July 31, 2014. Photo: Reuters
Israel will not stop its operation in Gaza until the tunnels constructed by Hamas have been destroyed, PM Benjamin Netanyahu has said.
Speaking ahead of a cabinet meeting, he said Israel was determined to destroy the tunnels - used to attack troops and towns - "with or without a ceasefire".
Earlier Israel called up 16,000 reservists, bringing the total mobilised so far to 86,000.
Some 425,000 people in Gaza have been displaced by fighting, the UN says.
That is as much as 25% of the population of the territory.
Israel began Operation Protective Edge on July 8. Since then at least 1,360 Palestinians have been killed, mostly civilians.
Israeli armoured personnel carriers (APCs) drive outside the central Gaza Strip July 31, 2014. Photo: Reuters
Some 58 Israelis have been killed, of which 56 were soldiers and two civilians. A Thai worker in Israel has also died.
The operation began with a focus on Hamas' rocket-launching capability, but has since expanded to take in the threat from tunnels.
After air strikes began, the Israel Defense Forces (IDF) discovered an extensive network of tunnels leading from Gaza into Israel.
Hamas militants have launched several attacks from the tunnels, killing a number of Israeli soldiers.
Gaza residents pick up warning leaflets dropped from an Israeli plane. Photo: AP
Reports from Israel suggest the discovery of the tunnels - and the reality that infiltrators have used them to kill Israelis inside their own country - has shocked many Israelis and bolstered support for the operation.
It launched a ground operation to destroy the tunnels on the night of 17 July, and insists that any ceasefire deal includes the right to continue that mission.
"I won't agree to any proposal that will not enable the Israeli military to complete this important task for the sake of Israel's security," Netanyahu said.
The tunnels would allow Hamas to "abduct and murder civilians and IDF soldiers while simultaneously attacking from the tunnels penetrating our territory," he added.
Displaced Palestinian children collect water at the Abu Hussein UN school, in Jebaliya refugee camp, northern Gaza Strip, 30 July 2014 The UN school hit on Wednesday was sheltering more than 3,000 displaced Palestinians. Photo: AP
In Gaza, Israeli shelling continued on Thursday morning, the BBC's Jon Donnison reports.
Meanwhile, a series of rocket alert sirens sounded across southern Israel. Sirens in the town of Sderot sounded several times as Netanyahu spoke.
Civilians in Gaza are braced for more strikes after a deadly day on Wednesday that saw more than 100 people die.
In the most controversial incident at least 16 people were killed when shells hit a UN-run school in the Jabaliya district of Gaza City.
The US and UN condemned the strike, with the UN secretary general saying "all available evidence" suggested Israeli artillery was the cause.
Spokesman Mark Regev told the BBC Israel would apologise if it discovered it was responsible.
"We have a policy - we don't target civilians," he said.
"It's not clear to us that it was our fire but we know for a fact there was hostile fire on our people from the vicinity of the school."
Later on Wednesday at least 17 were killed in a strike on a busy market in Shejaiya - a district already badly damaged by Israel artillery.
Israel occupied Gaza in the 1967 Middle East war and only pulled its troops and settlers out in 2005.
Israel considered this the end of the occupation, but it still exercises control over most of Gaza's borders, water and airspace. Egypt controls Gaza's southern border.
Hamas says it will not stop fighting until a blockade, maintained by both Israel and Egypt, is lifted.