Al Jazeera's Alan Fisher, reporting from the Israel-Gaza border, said: "I think what we are seeing here is preparations for what the media, according to the Israelis, is calling stage three, which is moving troops into the towns and cities of Gaza.
"They have called up a number of reservists, but by no means all the reservists that have been put on standby, and moved them into Gaza.
"They are there, ready for if the word comes that stage three is to begin. If there is to be this massive push then the soldiers are there ready to act," he said.
Medical sources said that dozens of Palestinian fighters were killed in clashes on Sunday, taking the total number of Palestinian deaths since Israel began its war on the territory to 890, many of them women and children.
Almost 4,000 Palestinians have also been wounded since the beginning of the offensive.
Al Jazeera's Ayman Mohyeldin, reporting from Gaza City, said that the Israeli manouevres had raised speculation that a full attack on targets in the city was being planned for the coming days.
Israeli tanks were positioned on the edge of the city to the north and east, while a column of tanks to the south advanced only to later pull back.
Ehud Olmert, the Israeli prime minister, told an Israeli cabinet meeting on Sunday that the military had nearly completed the goals set for the war on Gaza.
"Israel is getting close to achieving the goals it set for itself," he said.
He told ministers that Israel had "dealt Hamas an unprecedented blow ... It will never be the same Hamas," Oved Yehezkel, the Israeli cabinet secretary, said.
The cabinet meeting had been expected to include discussion of a possible "third stage" of the offensive in which the military would enter Gaza's urban areas.
However, several Israeli officials suggested that the offensive could be drawing to a close after last week's UN Security Council resolution calling for an immediate ceasefire.
"The decision of the security council doesn't give us much leeway," Matan Vilnai, the deputy defence minister, told public radio.
"Thus it would seem that we are close to ending the ground operation and ending the operation altogether."
Giroa Eiland, a former Israeli national security adviser, told Al Jazeera that there was a debate within the Israeli government and security establishment about what the goals of the operation should be at this stage.
"The main question is how to conclude and accomplish the missions," he said.
|Troops and tanks were reportedly deployed on the edge of Gaza City [AFP]
"As far as I can understand one of the reasons the military option might be expended is in order to give an Israeli solution to the situation."
Amos Gilad, a senior Israeli official, was expected to travel to Cairo in the coming days to discuss a plan to end the fighting after Hamas officials met Egyptian officials on Sunday.
The Israeli military onslaught has, so far, failed to achieve the stated aim of stopping Palestinian fighters from firing rockets into southern Israel.
At least 17 rockets had been fired across the border by mid-afternoon on Sunday, but failed to cause any casualties.
Thirteen Israelis have been killed since the military offensive began, including three civilians hit by rockets fired from the Gaza Strip into Israel.
Khaled Meshaal, the exiled political chief of Hamas, said Hamas would not accept any truce initiative while "we are still under attack".
"I address the Israelis and say to them; 'What have you achieved through this war you have supported? And you supported your leaders to conduct it,'" he said.
"You have achieved nothing but killing innocent children and leaving Gaza in a sea of blood."