An Israeli official said progress has been made, but the details are being finalised.
The Associated Press obtained a copy of the proposed agreement, and an Egyptian official and a Hamas official confirmed its authenticity. The plan will need to be submitted to the Israeli Cabinet for final approval.
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Qatar, a key mediator in the talks, said Israel and Hamas are at the “closest point” yet to an agreement.
The United States, Egypt and Qatar have spent the past year trying to mediate an end to the 15-month war and secure the release dozens of hostages captured in Hamas’s attack on October 7, 2023 which triggered it.
Hamas-led militants killed around 1200 people in the attack and abducted another 250. Some 100 Israelis are still being held captive inside the Gaza Strip, and the military believes at least a third of them are dead.
Israel’s retaliatory offensive has killed more than 46,000 Palestinians, more than half of them women and children, according to Gaza’s Health Ministry, which does not say how many of the dead were combatants.
The Israeli military says it has killed more than 17,000 fighters, without providing evidence.
The offensive has reduced large areas of the territory to rubble and displaced around 90% of the Gaza Strip’s population of 2.3 million, with hundreds of thousands packed into tent camps along the coast where hunger is widespread.
Officials have expressed mounting optimism that they can conclude an agreement ahead of the January 20 inauguration of US President-elect Donald Trump, whose Middle East envoy, Steve Witkoff, has joined the negotiations in the Qatari capital, Doha.
The phased deal would be based on a framework laid out by President Joe Biden in May and endorsed by the UN Security Council.
In the first phase, Hamas would release dozens of the most vulnerable hostages seized in the attack on October 7, 2023, that triggered the war, in exchange for dozens of Palestinian prisoners as Israeli forces pull back from population centres.
At least some Palestinians would be allowed to return to their homes and there would be a surge of humanitarian aid.
In the second phase, Hamas says it would release the remaining hostages in exchange for a large number of prisoners, a full Israeli withdrawal and a lasting ceasefire.
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Israeli Prime Minister Benjamin Netanyahu has vowed to keep fighting until Hamas’s military and governing capabilities have been destroyed and it no longer poses a threat.
The gap between the two sides would be negotiated during the first phase.
It came as Israeli strikes in the Gaza Strip overnight killed at least 18 people, including six women and four children.
Two strikes in the central Gaza city of Deir al-Balah killed two women and their four children, who ranged in age from one month to nine years old. One of the women was pregnant and the baby did not survive, according to Al-Aqsa Martyrs Hospital, where the bodies were taken.
Another 12 people were killed in two strikes on the southern city of Khan Younis, according to the European Hospital.