However, she said Hamas had held "Gaza hostage" and had to pay "a high price for terror".

More than 1,100 Palestinians and 13 Israelis have died since Israel began an offensive on the Gaza Strip on December 27.

Ceasefire efforts

Rice said Israel was planning to pursue similar bilateral agreements over arms smuggling with "our European colleagues".

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She also insisted that the US was continuing to work on "as quick a timeline as we possibly can" to support Egyptian efforts to mediate a ceasefire in Gaza.

However she told journalists that a US timeline for the ceasefire "is not important" when asked if a ceasefire could be achieved before Barack Obama, the US president-elect, takes over power from George Bush next Tuesday.

Senior officials from the US and Israel have been in repeated contact in recent days over the Gaza crisis, including a phone conversation between Rice and Ehud Olmert, the Israeli prime minister, on Thursday.

Riad Kahwaji, director at the Institute for Near East and Gulf Military Analysis, points out that, as Obama is set to enter the White House, "this agreement commits the coming administration to further collaboration with the Israelis on the Gaza issue".

However, he said the success of the deal still depends on the level of US involvement.

"We could see this deal being more a sharing of intelligence, giving Israel more access to US satellite imagery on the borders, providing more censors," he said. "And you have the sea front, where the US could possibly play a bigger role."

But while the deal would give Israel more leverage at the negotiating table with the Palestinians, without more engagement from Egypt, it would not be a practical solution, he said.