JERUSALEM: A ceasefire in the bloody conflict between Israel and Hamas has been agreed.

The truce, announced by Egypt's Foreign Minister Mohammed Kamel Amr, came into effect last night at 7pm.

Israeli Prime Minister Benjamin Netanyahu confirmed the deal, saying he had agreed after consulting with US President Barack Obama.

It ends a week of fighting that has killed more than 140 Palestinians and five Israelis.

One Palestinian official said under its terms Israel would cease all military activity against the Hamas-ruled Gaza Strip and Palestinian militants would cease rocket attacks into Israel.

After 24 hours of quiet, Gaza's border crossings with Israel would be opened further to allow freer movement of goods and people.

The ceasefire came hours after a bomb ripped through an Israeli bus near the nation's military headquarters in Tel Aviv, injuring at least 10 people.

US Secretary of State Hillary Clinton said the ceasefire had come at a crucial time for countries of the Middle East.

She said: "Egypt's new government is assuming the responsibility and leadership that has long made this country a cornerstone for regional stability and peace."