Hamas Israel Palestine
Members of Hamas' armed wing are seen inside a lift after attending a news conference in Gaza City. Reuters

A ceasefire is set to be declared between Israel and Hamas after Egyptian intelligence officials brokered talks between the two.

Israel has bombarded the occupied territory almost every day since the discovery of the bodies of the three kidnapped Israeli teenagers, with rockets from Hamas militants in the Gaza Strip being fired into southern Israel.

It is believed that the designated terror group has offered to stop its rocket attacks if Israel halts its aerial bombardment of the Gaza Strip. Israel is yet to comment on the potential of a ceasefire.

The Times of Israel reports that Egypt reached an agreement with both parties that "quiet will be met with quiet".

"Neither side is interested in an escalation," an unnamed source told the Israeli news outlet.

An unnamed Hamas source said that talks with Egyptian officials had "succeeded in reaching a new truce between Hamas and Israel, and that the ceasefire agreement was to be announced within hours".

Israel mobilised extra troops to the border of the Gaza Strip after a barrage of rockets from the territory struck two houses in southern Israel.

Prime Minister Benjamin Netanyahu said Israel would only carry out aerial bombardments if rocket attacks continued.

"We are ready for two options in the south. If [Hamas] fire toward our towns in the south ceases, then so shall our actions. The second option is that if fire toward our residents in the south continues, then our bolstered forces there will act forcefully," he said.

Tensions in Jerusalem are high ahead of a funeral for the Palestinian teenager who was kidnapped and murdered in a suspected revenge attack for the deaths of three Israeli teenagers.

Clashes have erupted in the Israeli capital between Palestinians and Israeli police over the death of 17-year-old Mohammed Abu Khdair.

The teenager's funeral was delayed following an argument between his family and Israeli police over the release of his body.

In order for the funeral to take place, police are now set to release Khdair's body to the family after Friday prayers which are scheduled to end at approximately 1230 local time.