A rocket has been fired from Gaza into Israel, just two hours before a three-day ceasefire was due to end.
Police spokeswoman Luba Samri confirmed that a rocket came down in an open area near Ashkelon. No casualties have been reported.
According to the terms of the temporary truce, Israel had agreed to halt military operations, while Gaza militants in turn would stop firing rockets. The 72-hour truce officially ends at 10pm UK time today.
Responding to reports of rocket fire by Hamas, an Israeli official said: "We agreed to extend the truce and continue the negotiations but (the Palestinians) are digging their heels in. The way things stand now, it doesn't look like it's going to stay quiet."
Hamas have denied firing rockets at Israel.
The report comes as Israel agreed to extend peace talks between Hamas in a bid to find a long-term resolution to the month-long Gaza conflict.
Israeli and Palestinian negotiators are currently in indirect talks in Egypt, where Hamas indicated it was open to extending the 72-hour ceasefire, to allow more time for negotiations.
A Hamas official said: "We have finished talks today without agreement. More work needs to be done to have a better deal. We are deliberating internally over an offer to extend the ceasefire."
An Israeli cabinet minister has accused the UK government of "encouraging" Hamas to re-start rocket fire from Gaza, following a decision to suspend some arms exports to Israel if fighting resumes.
The UK government had earlier warned that it will suspend 12 licences for exports to Israel if the current ceasefire in Gaza does not hold.
The announcement came after Liberal Democrat leader Nick Clegg said Britain should revoke all sales of military equipment to Israel if the conflict in Gaza continues.
Almost 2,000 people have died since fighting broke out in Gaza on 8 July, the majority of them, civilians.
On the Israeli side, 67 people have died, all but three of them soldiers.
Gaza's Hamas rulers were blamed for the kidnapping and murder of three Israeli teenagers in the West Bank in June.
Nine days later, Israel sent in ground troops to destroy Hamas' underground cross-border tunnels constructed for attacks inside Israel.