In the hours before the truce went into effect after dawn, the two sides were still fighting. An hour before the truce went into effect, a Palestinian gunman was killed and another wounded by an Israeli missile, medical workers and militants told the Associated Press, and dozens of Palestinian rockets and mortar bombs hit southern Israel, though none caused serious damage.
On Wednesday, Israeli Prime Minister Ehud Olmert said that the peace agreement with Hamas was "fragile and likely to be short-lived."
Olmert also warned Hamas that this most recent truce was the militant's group last chance to avoid an Israeli military attack into the Gaza Strip, the territory controlled by the group.
Israeli Defense Minister Ehud Barek told the French newspaper Le Monde that Israel's bloody history with Hamas made it difficult to predict the outcome to the truce.
"Historically, we are on a collision course with Hamas. But it still makes sense to grasp this opportunity," he said.
While Israel, like the U.S. and the European Union, classifies Hamas as a terrorist organization, it has come under increasing international pressure to broker some kind of peace agreement. With the Egyptians as negotiators, Israel's Security Council agreed to pursue a truce last week.
But Hamas has much to gain from the cessation of hostilities, including relief from the Israeli-led blockade which has limited the amount of necessary supplies that could reach the area; the group also may gain some credibility with the West and a possible reconciliation with President Mahmoud Abbas, who is currently in the midst of a U.S.-sponsored peace negotiations with Olmert.
Israel hopes to halt the constant barrage of mortar and rocket attacks that have killed four Israeli civilians this year and Gaza Strip residents hope to ease the ever-present tension caused by the threat of Israeli military attacks.
"I want to be able to sleep without the sound of shelling or warplanes," Eman Mahmoud, a 22-year old Gaza university student told the AP. "I am not sure how long it is going to last, but my dream is that this calm will continue."
This current cease-fire is just one of several diplomatic efforts Israel is currently engaged in. On Wednesday, Israel said it hoped to start direct peace talks with Lebanon, saying all possibilities would be on the table, including the return of a disputed sliver of land Israel holds on their border.
Israel is also in a second round of indirect peace talks with Syria and is very close to brokering a prisoner swap with Hezbollah, the Shiite guerilla group based in Lebanon.