The Troika of Prime Minister Ehud Olmert, Defense Minister Ehud Barak, and Foreign Minister Tzipi Livni decided on Sunday to formulate a proposal for a deal that would secure the release of abducted Israel Defense Forces Gilad Shalit and a truce with Hamas in the Gaza Strip.

When it is formulated, the proposal will be brought before the cabinet for a vote, possibly as early as Wednesday.

The Troika has agreed to hold an additional meeting before the cabinet vote.

During the meeting Olmert said Israel will not agree to any truce deal and won't open the border crossing with Gaza before Gilad Shalit is released.

A source in the Prime Minister's bureau said on Saturday that Olmert will ask for Likud Head Benjamin Netanyahu's opinion in light of last Tuesday's election results.

Despite garnering less votes than the ruling Kadima Party, the right-wing camp's majority in the upcoming Knesset gives the Likud leader the best chance to form the next governing coalition.

Olmert will also huddle with Netanyahu before signing off on a renewed cease-fire with Hamas in the Gaza Strip.

"Netanyahu is updated every so often on developments and we will want to consult with him before making a decision on a matter that will be critical for the next government," the source said.

In a speech opening the Knesset session in October, Netanyahu gave Olmert a "green light" in negotiating a deal for Shalit. "I hope he comes back to us healthy and complete as soon as possible, Mr. Prime Minister, God willing before the elections.

Olmert's office on Saturday issued a statement saying that Israel will not agree to a cease-fire with Hamas in the Gaza Strip unless abducted Israel Defense Forces soldier Gilad Shalit is freed.

"The prime minister's position is that Israel will not reach understandings on a truce before the release of Gilad Shalit," the statement said.

The PMO statement also denied reports in the Arab media whereby Israel and Hamas are on the brink of announcing a cease-fire agreement.

"Israel is not currently engaging in any negotiations with Hamas, and certainly won't achieve any kind of understanding," the statement said.

The family and supporters of Shalit on Saturday welcomed the statement, saying they feel there has been a change in the government and prime minister's approach regarding Gilad. They added, however, that they still view all reports regarding a deal with caution.

The Prime Minister's Office said further that on Sunday, the cabinet will convene discussions on Israel's future policy regarding Gaza, which will examine all the options. Olmert is scheduled to meet with Foreign Minister Tzipi Livni and Defense Minister Ehud Barak to discuss the issue.

Olmert's office stressed that the prime minister's top priorities at this time are the safety of the residents of southern Israel, who have been pounded by rockets and mortar shells fired by Gaza militants, and the freedom of abducted Israel Defense Forces soldier Gilad Shalit. "Israel will invest all its efforts into these two goals," the statement said.

Two rockets and a mortar shell fired from Gaza hit southern Israel on Friday, and Israel retaliated with airstrikes on several Gaza targets.

Rocket fire and shooting incidents along the Gaza-Israel border have persisted since the end of Israel's devastating offensive against Hamas in the territory. Israel halted the operation on Jan. 18, and Hamas declared a cease-fire later the same day.

Earlier Saturday, Damascus-based Hamas political leader Khaled Meshal denied that complications were holding up the declaration of a cease-fire in Gaza, scheduled for Sunday, the Beirut-based Al-Manar network reported.

According to Al-Manar, the Hamas leader told Al-Jazeera that the deal will be signed on Sunday in Cairo. On Friday, the French news agency AFP reported that Meshal had said that a "setback" had arisen, which could possibly delay the cease-fire agreement with Israel.

AFP quoted Meshal as telling reporters in Qatar that the truce "was supposed to start on Sunday, but there has been a setback, and it will not start as it was expected." The news agency did not offer any specifics on the talks.

Ali Barakeh, deputy head of Hamas' office in Damascus, Syria, declined to discuss the comment, saying only that the negotiations were ongoing.

On Friday, Hamas officials said that an agreement with Israel on a long-term cease-fire in Gaza could be announced within days, but a new cycle of attacks by both sides put new strains on the temporary truce that has held since Israel's offensive ended on January 18.

A Hamas delegation is in the Egyptian capital, and an Israeli envoy has been flying in periodically from Tel Aviv. Egypt is mediating between the two sides because Hamas and Israel will not talk directly to each other.

A few hours before Meshal spoke, Taher Nunu, a spokesman for Hamas' truce delegation in Cairo, said he expected an agreement "within the coming three days." He said progress had been made on a cease-fire, on a reconciliation between Hamas and Fatah, and on reconstruction funds for Gaza.

"Many obstacles have been resolved, especially stopping all forms of aggression and the issue of the quality and kind of goods [entering Gaza] and the opening of the border," Nunu said in a statement e-mailed to reporters in Gaza.

The border crossings have been blockaded by Israel and Egypt since Hamas violently seized power in the territory in 2007, defeating the rival Fatah faction.

Late Thursday, Hamas deputy leader Moussa Abu Marzouk told Egypt's official MENA news agency that the Islamic militant group agreed to an 18-month truce with Israel and that it would be announced within two days after the group consulted with other Palestinian factions.

Abu Marzouk said the deal calls for Israel to reopen its border crossings into Gaza, fulfilling Hamas' central demand.

Egyptian state-run newspapers Friday quoted Egypt's top mediator, intelligence chief Omar Suleiman, as saying that four obstacles remained to be resolved; firing rockets, establishing a buffer zone between Gaza and Israel, a Hamas commitment to respect calm and a halt to weapons smuggling into Gaza.

Israeli defense officials said the talks were serious and making progress. An initial agreement could involve a partial opening of Gaza's crossings, they said, with a later agreement to include the release of Gilad Shalit, an Israeli soldier held by Hamas since 2006, in return for the release of Palestinian prisoners demanded by Hamas.

Talks on Shalit's release have stalled over disagreements about which prisoners Israel would free. The hundreds of names on Hamas' list include senior militants and masterminds of deadly suicide bombings. The officials spoke on condition of anonymity because the details remain classified.

It was unclear whether the results of Israel's national election this week would affect the Cairo talks. The election ended with the moderate foreign minister, Tzipi Livni, winning one more parliament seat than hard-line Likud leader Benjamin Netanyahu.

But with hawks now forming a majority in the incoming parliament, Netanyahu has better chances of cobbling together a coalition government. He met with potential allies Friday. Coalition wrangling is expected to last weeks, at least.

A new government is likely to be either a hard-line coalition led by Netanyahu or a centrist coalition involving a power-sharing arrangement between Netanyahu and Livni.