The Israeli military said a soldier and a civilian have been killed by rocket fire from the Gaza Strip.
An unnamed army spokesman confirmed that both the casualties happened close to the Israel-Gaza border on November 20.
Meanwhile, Israeli government spokesman Mark Regev said that the announcement of an imminent cease-fire with Hamas was premature.
He said that the Israeli military operations in Gaza would continue in parallel with diplomacy.
A Hamas spokesman earlier had said that militants from the Gaza Strip and Israel had agreed to an Egyptian-brokered truce at midnight local time.
Egyptian President Muhammad Morsi had also predicted such a deal.
At least 120 Palestinians have been killed in a week of Israeli-Palestinian violence. The latest casualties bring the number of Israelis killed to five.
In Jerusalem, Israeli Prime Minister Benjamin Netanyahu said his country would partner in any long-term solution to the Gaza crisis. But he warned that Israel will continue to defend itself if no diplomatic solution to the Palestinian rocket fire is found.
"If a long-term solution can be put in place through diplomatic means, then Israel will be a willing partner to such a solution," he said. "But if stronger military action proves necessary to stop the constant barrage of rockets, Israel will not hesitate to do what is necessary to defend our people."
Netanyahu was speaking on November 20 after a meeting with UN Secretary-General Ban Ki-moon. The UN chief is in the region as part of an international diplomatic push to end nearly a week of fighting between Israel and Hamas.
Ban condemned the Hamas rocket attacks but urged Israel to show "maximum restraint" and cautioned against a possible ground operation.
"While Israeli rockets may be aimed at military targets inside Gaza, they kill and injure civilians and damage civilian infrastructure," he said. "The loss of civilian lives is unacceptable under any circumstances. The excessive use of force is unlawful and must be rejected."
U.S. Secretary of State Hillary Clinton is expected to land in Israel within the next few hours.
Meanwhile, Arab League chief Nabil Elaraby crossed into Gaza earlier on November 20 to show solidarity with Hamas.
With reporting by Reuters, AFP, dpa, and AP