The cease-fire agreement was reached earlier in the day. The fighting included hundreds of rockets fired into Gaza, and it continued Wednesday morning, with the first bombing in Tel Aviv since 2006. The week left more than 140 Palestinians and Five Israelis dead.
The agreement was announced at a news conference in Cairo by Egypt's foreign minister, Mohammed Kamel Amr, with Secretary of State Hillary Clinton standing by.
"The United States welcomes the agreement today for a cease-fire in Gaza. For it to hold, the rocket attacks must end, at the whole the rocket attacks must end, a broader calm return," Clinton said.
A few hours before the cease-fire was announced, the wounded from the latest rocket attacks in Gaza were still being treated. In Jerusalem, Israeli Prime Minister Benjamin Netanyahu confirmed the deal, saying he had agreed after consulting with President Barack Obama.
Earlier, a bomb exploded aboard an Israeli bus near the nation's military headquarters in Tel Aviv. Twenty-seven people were wounded. The blast was the first bombing in Tel Aviv in six years and appeared aimed at sparking fears of a return to the Palestinian uprising.
"This is a critical moment for the region. Egypt's new government is assuming the responsibility and leadership that has long made this country a cornerstone of regional stability and peace," Clinton said. "The people of this region deserve the chance to live free from fear and violence, and today's agreement is a step in the right direction that we should build on."
Even after the deal was announced, an air-raid siren signaled a rocket attack in southern Israel, while an airstrike could be heard in Gaza. In the last-minute burst of fire, Palestinian militants fired five rockets into the southern Israeli city of Beersheba. One rocket hit a house inside the city, police said. No injuries were reported.
Israel launched well over 1,500 airstrikes and other attacks on targets in Gaza, while more than 1,000 rockets pounded Israel since the fighting began on Nov. 14.
According to the agreement, Israel agrees to stop hostilities in Gaza and targeted killings. Hamas agrees to stop rocket fire into Israel and along the Gaza border. At the same time, all the Gaza border crossings will open within 24 hours, and Egypt will act as an agreement sponsor.
The Associated Press contributed to this report.