A ceasefire in Gaza has come into effect following two days of violence which left 32 people dead.

The agreement was brokered by Egypt and has been endorsed by Palestinian factions, including Islamic Jihad.

An Egyptian official said the agreement stipulates that Palestinian factions must ensure a return to calm in Gaza and "maintain peace" during demonstrations, while Israel must stop hostilities and "ensure a ceasefire" during demonstrations by Palestinians.

The agreement, which entered into force at 5.30am local time, came after the death toll from Israeli airstrikes on the Gaza rose to 32 since Tuesday after Palestinian officials said six members of the same family, including three children and two women, had been killed.

Following the targeted killing of a top militant in Gaza, the two sides had been exchanging fire since Tuesday, and Israel's military said it recorded more than 350 incoming rockets.

The Israeli military had been targeting what it said were Islamic Jihad militant sites and rocket-launching squads in the coastal enclave.

The previous day, Israel said it targeted two Islamic Jihad militants preparing to fire anti-tank missiles.

Air raid sirens wailed and fireballs exploded as air defence missiles intercepted rockets, sending Israelis rushing to bomb shelters.

UN envoy Nickolay Mladenov arrived in Cairo yesterday afternoon, airport officials said, following reports he was to hold talks aimed at halting the fighting.

The UN and Egypt were instrumental in mediating previous ceasefires between Israel and Gaza-based militants.

Israeli Prime Minister Benjamin Netanyahu had said Islamic Jihad must stop its rocket attacks or "absorb more and more blows".

An Islamic Jihad spokesman had said the group was not interested in mediation as it retaliated over the killing of one of its commanders.

Israel killed senior Islamic Jihad commander Baha Abu al-Ata and his wife Asma in a targeted strike early on Tuesday, prompting barrages of tit-for-tat rocket fire and air strikes.

According to Israel, Ata was responsible for rocket fire at Israel as well as other attacks and was planning more violence, with the military calling him a "ticking bomb".

The flare-up raised fears of a new all-out conflict between Israel and Palestinian militants in Gaza, who have fought three wars since 2008.

There have been no Israeli deaths, though one rocket narrowly missed cars on a busy highway.

Israeli medics said they had treated 48 people for light wounds, while schools were closed in areas near the Gaza border for a second day running.

In a sign it was seeking to avoid a wider conflict, Israel's announced targets were confined to Islamic Jihad sites and not those belonging to Hamas.

It normally holds Hamas, the Islamist movement that rules Gaza, responsible for all rocket fire from the enclave as the territory's de facto rulers.

Islamic Jihad is the second-most-powerful militant group in Gaza after Hamas and has taken responsibility for rocket fire.

The flare-up came at a politically sensitive time for Israel, with no new government in place after September elections ended in deadlock.