Tel Aviv  - Saying Israel has achieved the aims of its Gaza offensive, Prime Minister Ehud Olmert announced Saturday night that Israel will stop fighting in the salient at
0000 GMT Sunday (2 am local time), although troops would not be pulling out of the enclave.

But the Islamic Hamas movement, against whom the three-week-long Israeli operation was directed, said they would not respect any ceasefire so long as Israeli troops remained in the Gaza Strip.

"The cabinet has decided to accept my proposal and to declare a ceasefire," Olmert told a news conference, held immediately after the inner, or security, cabinet met in Tel Aviv.

He said that Israeli troops would only leave the Strip once Israel was satisfied Hamas fire had ceased completely.

He said that if Hamas fire "ends completely, the Israel Defence Force (IDF) will weigh exiting Gaza at a time that suits us. If not, the IDF will continue to act to defend our citizens."

"If our enemies decide that the blows that they received weren't enough and they are interested in continuing the fighting, Israel will be prepared for that and will feel free to continue and react with force," he added.

A senior Hamas official in Lebanon said that as long as Israeli soldiers remain in Gaza "we are not concerned with the ceasefire."

Earlier, Osama Hamdan had said that Israel also had to lift its siege of the Gaza Strip and open the crossing points.

"If there will be an Israeli withdrawal from Gaza and a lifting of the siege, Hamas will then be able to deal with the issue positively," he said.

Hamas spokesman in the Gaza Strip Fawzi Barhoom was similarly defiant, and the group's military wing, the al-Qassam Brigades, said the group would continue its "resistance" so long as Israeli troops remained in the Strip and the Israeli blockade remained in place.

Palestinian analysts said it was likely that Hamas will continue firing rockets, despite the Israeli truce.

The point was taken up by Israeli Defence Minster Ehud Barak who addressed the news conference after Olmert, and warned that "we are ceasing our fire, but there is no absolute security. Hamas could continue to fire at our forces and at the (Israeli) home front."

Shortly after the Israeli announcement, militants in the Strip fired eight long-range Grad missiles at the Israeli city of Beersheba.

It was however not immediately clear whether Hamas' actions, once the Israel ceasefire came into effect, would match its defiant rhetoric.

Israel has indicated that it is unlikely to pull its troops out the Strip until one its key demands - a mechanisms to end to Hamas weapons smuggling - is met.

Olmert said Saturday night that Israel had reached "a number of understandings ... which will ensure that the strengthening of Hamas will decrease," and that the realization of understandings with the Egyptian government "will bring about a significant reduction in weapons smuggling from Iran and Syria to the Gaza Strip."

He said that Britain, Italy, Germany, and France, had also committed to helping in the anti-smuggling efforts.

The United States welcomed Israel's announcement, with Secretary of State Condoleezza Rice saying that the US "expects that all parties will cease attacks and hostile actions immediately."

The Israeli security cabinet meeting Saturday night came after mounting speculation that Israel might surprise and go for a unilateral cessation of hostilities, bypassing Egyptian mediated talks.

Israel and Hamas do not talk to each other directly but go through Cairo, which had been pushing for a ceasefire based on a short-term "humanitarian" truce, followed by negotiations on a longer-term ceasefire that would include the Israeli security concerns and the militants' demand that the borders be opened.

Israeli media reported that two ministers voted against the ceasefire proposal, and one abstained.

Israel launched its Operation Cast Lead against Hamas in the Gaza Strip three weeks ago, following sustained rocket fire from the salient on southern Israeli towns and villages.

At least 1,203 Palestinians have been killed and over 5,100 injured since Israel began its military campaign. Three Israeli civilians and 10 soldiers have died since the operation began, and over 700 rockets have been fired from Gaza. (dpa)