An Israeli official said visiting CIA Director Bill Burns and Prime Minister Benjamin Netanyahu discussed Wednesday "the possibility" of suspending military operations in Gaza's Rafah in exchange for Hamas freeing hostages.

Netanyahu and the US spy chief, who has been involved in mediation efforts in the Israel-Hamas war, met in Jerusalem as part of Washington's latest efforts to secure a truce in the Gaza Strip.

"The two discussed the possibility of Israel pausing the operation in Rafah in exchange for hostage release," the Israeli official told AFP on condition of anonymity.

The meeting came as truce negotiations resumed in Cairo, after Hamas on Monday announced it had accepted a ceasefire proposal from mediators Egypt and Qatar.

Israel has defied international objections and sent tanks into Rafah, the Hamas-ruled territory's southernmost city on the Egyptian border which is packed with Palestinian civilians sheltering.

Overnight Monday-Tuesday, Israeli forces seized the Palestinian side of the key Rafah border crossing, which is the main conduit for aid into the besieged territory.

Israel's incursion into eastern Rafah came after Hamas said it had accepted a truce proposal -- one Israel said was "very far" from what it negotiators had previously agreed to.

On Wednesday, talks aimed at agreeing terms for a truce in the seven-month war were held in the Egyptian capital "with all sides present", according to the Egyptian state-linked media.

The United States, Israel's close ally and top provider of military assistance, confirmed negotiations were underway.

"The talks are ongoing," White House Press Secretary Karine Jean-Pierre told reporters.

"A close assessment of the two sides' position suggests they should be able to close... the remaining gaps, so we're going to continue to support that process."

Hamas has warned the ongoing talks would be Israel's "last chance" to rescue the estimated 128 hostages still held in Gaza, including 36 who are dead according to Israeli officials.

Mediation efforts have stalled as Hamas has insisted on a lasting ceasefire while Netanyahu has repeatedly vowed to destroy the group's remaining forces in Rafah.

The war was sparked by Hamas's unprecedented October 7 attack on Israel that resulted in the deaths of more than 1,170 people, mostly civilians, according to an AFP tally based on official Israeli figures.

Militants also seized around 250 hostages. Scores of them were released during a one-week truce in November, including 80 Israelis freed in exchange for Palestinian prisoners held by Israel.

Israel's retaliatory offensive against Hamas has killed at least 34,844 people in Gaza, mostly women and children, according to the Hamas-run territory's health ministry.