The Israeli military has resumed operations in Gaza, saying Hamas broke a planned 72-hour ceasefire just hours after it had begun.
Palestinian sources said at least 27 people had been killed in an Israeli attack in Gaza. Israel said Hamas began the hostilities.
The Israeli army said it was checking reports a soldier had been captured.
Some 1,460 Palestinians, mostly civilians, have died in the conflict and 63 Israelis, mostly soldiers.
The ceasefire had been brokered by the US and UN to give civilians a reprieve from the violence, and had been seen as an unforeseen breakthrough after days of diplomatic deadlock.
Palestinian and Israeli delegations have arrived in Cairo, Egypt, with the hope of negotiating a longer-term cessation of hostilities, but the fate of the talks now seems unclear.
Analysis: Martin Patience, BBC News, Gaza
The clashes in Rafah came just four hours into what was meant be a 72-hour ceasefire, reinforcing just how difficult it is to get truces to last beyond a very short time. Both sides will have expected such violations.
While it held, much of Gaza was relatively quiet compared to the violence in recent weeks. The streets were slowly returning back to life as shops began to reopen. People had been taking the opportunity to stock up on much needed supplies.
A steady stream of cars headed towards evacuated neighbourhoods close to the Israeli border. People here want to see if their houses are still standing and to try to salvage what's left of their belongings.
The BBC's Bethany Bell, in Jerusalem, says there had been enormous international pressure for a 72-hour lull to allow people in Gaza to bury their dead and restock with food.
During the morning life appeared to be returning to some kind of normality in Gaza, with many Palestinians heading towards heavily shelled areas to see if their homes were still intact.
But the Gaza health ministry reported that at least 27 Palestinians were killed and 100 injured in an Israeli attack near the southern town of Rafah after the ceasefire began.
AFP news agency said the artillery barrage was continuing, preventing medics from recovering dead and wounded from the site.
Israeli foreign affairs spokesman Yigal Palmor told the BBC that Israeli forces had retaliated after being attacked in what seemed like a planned move by Hamas.
"There was a full-scale attack on an Israeli unit and this unit had to respond," he said.
"After it responded, Hamas started firing rockets on Israeli territory again and therefore the fighting resumed all along the line.
"I can't say for sure but this seems like it was planned, like it was well prepared, and they had no intention to keep and observe the ceasefire to begin with."
Meanwhile Israeli and Palestinian delegations have arrived in Cairo for negotiations with the government of Egypt, at the invitation of Egypt, the statement said, with the aim of reaching "a durable ceasefire".
But our correspondent says the breakdown of the ceasefire casts an enormous shadow over the talks.
- Saturday, 26 July: 12-hour humanitarian truce observed by both sides from 05:00 GMT (08:00 local time) till 17:00 GMT
- Israeli cabinet agrees four-hour extension until 21:00 GMT while it considers UN request for 24-hour extension, but continues operation against "terrorist" tunnels
- Hamas rejects extension to 21:00 GMT because it wants "complete" stop to fighting and end to Gaza blockade
- Israel announces extension of ceasefire for 24 hours till 21:00 GMT on Sunday
- Sunday, 27 July: Israel resumes operation in response to "incessant rocket fire" from Gaza. Hamas declares 24-hour truce, but continues rocket fire, and Israel rejects ceasefire
- Friday 1st August: Israel and Hamas agree 72-hour humanitarian ceasefire from 05:00 GMT, but Israel resumes operations within hours accusing Hamas of violations