Summary The truce will be applicable from 12pm Tuesday night and two sides will stop mutual hostilities.
115 people have been killed in six days clashes between Israeli forces and Hamas militants.
Israel has been conducted air raids on Gaza City for the last six days.
Hamas militants fired rockets inside the Israel territory.
United nations chief Tuesday warned of a huge humanitarian disaster in Gaza City.
US President Barak Obama Tuesday called Egypt President three times on Tuesday in this connection.
Earlier, Egypt s President Mohammed Morsi had said Israel s aggression against Gaza will end on Tuesday and Cairo-mediated truce efforts will produce results within hours, the official MENA news agency reported.
"The farce of the Israeli aggression will end today, Tuesday, and the efforts to reach a ceasefire between the Palestinians and Israelis will produce positive results within a few hours," it quoted him as saying.
A senior Hamas official told AFP "the agreement is expected to crystallise in a few hours."
The main sticking point, he said, was whether Israel would begin easing its six-year long blockade of Gaza coinciding with the truce or at a later date.
"A compromise solution is for there to be agreement on lifting the siege, and that it would be implemented later at a specified time," he said.
Israel on Tuesday said it was holding off a threatened Gaza ground offensive to give the truce talks a chance, after an overnight meeting of senior Israeli ministers weighed the Egyptian proposal.
Morsi s announcement comes amid intense diplomatic efforts that brought UN Secretary General Ban Ki-moon on a visit to Cairo on Monday and Israel on Tuesday to bolster efforts to end the week-long conflict.
US Secretary of State Hillary Clinton, on a Southeast Asia tour with President Barack Obama, was also travelling to the region to meet leaders including Israeli Prime Minister Benjamin Netanyahu.
Arab countries meanwhile ratcheted pressure on Israel by sending a delegation of foreign ministers headed by Arab League chief Nabil al-Arabi to Gaza on Tuesday.
