Hamas said it had handed its response to mediators in Egypt and Qatar. It said any agreement must end Israel's war in Gaza.
ADVERTISEMENTA statement from Israeli intelligence agency Mossad said ''The rejection of the proposal by the three mediators, which included the most significant flexibility on Israel's part, proves that (Yahya) Sinwar does not want a humanitarian deal and the return of the hostages, is continuing to exploit the tension with Iran, and is striving to unite the sectors and achieve a general escalation in the region.''
The statement was published on the Prime Minister's Office web page. Yahya Sinwar is the highest-ranking Hamas official in Gaza and the territory's de facto ruler.
The statement also said Israel would continue to strive to realise ''the objectives of the war with Hamas with full force, and leave no stone unturned to return the 133 hostages from Gaza forthwith.''
Israel's frequent bombardment of the strip has decimated homes and businesses across the territory, and displaced around 1.9 million Palestinians, according to the UN.
Many who have been sheltering in central Gaza are defying the Israeli military's repeated warning not to go to their homes in the north of the strip, telling them it remains a war zone.
Video captured by the Associated Press on Sunday showed dozens of displaced families heading north through the coastal Rashid road, one of the two main thoroughfares linking southern Gaza to the north. The majority were on their feet, while others took donkey carts.
Displaced Palestinian Hanaa Abu Humaeidan from Jabaliya said her life in central Gaza has been ''very miserable''.
''All the necessities of life are non-existent in this area, and of course we are deprived of our children, our husbands, and our families. We are deprived of all the pleasures of life, and we are trying, at the risk of ourselves, to return to the places we were in before and meet our families and children who remained there and to meet our loved ones.''
Areej Abu Ouda wants to return home to the Shati refugee camp, also located in the north.
''We want our homes. We want our lives. We want to return, whether with a truce or without a truce. We want to return. It's enough. We are bored and tired.''
Northern Gaza, including Gaza City, was the first target of Israel's operation against Hamas.
The Israeli military has sealed off the northern half of the strip and forced hundreds of thousands of Palestinians to leave their homes and head to Gaza’s southern parts.
In its efforts to ''eradicate'' Hamas, the Gaza health ministry said Israeli troops have killed at least 33,729 Palestinians.
Israel's army (IDF) said it has killed as many as 13,000 Hamas fighters and allies.
The conflict was triggered when Hamas invaded Israel on 7 October and killed 1,139 Israelis and foreigners. The gunmen also kidnapped 253 Israelis and foreigners, some of whom have died in Gaza or been freed.