A ceasefire between Israel and Palestinian militants in Gaza took hold Thursday after two days of fighting triggered by an Israeli strike on an Islamic Jihad commander, with 34 Palestinians killed in exchanges of fire.

Both Palestinian militant group Islamic Jihad and Israel's military confirmed the ceasefire early Thursday brokered by Egyptian and UN officials -- the usual mediators between Gaza and Israel.

Five rockets were fired at Israel from Gaza after the ceasefire came into effect and air defences intercepted two of them, the army said, but the incident did not appear likely to set off another severe round of fighting.

"#Egypt and the #UN worked hard to prevent the most dangerous escalation in and around #Gaza from leading to #war," tweeted Nickolay Mladenov, UN envoy for the Israeli-Palestinian conflict, who travelled to Cairo for the talks.

"The coming hours and days will be critical. ALL must show maximum restraint and do their part to prevent bloodshed."

The agreement, which entered into force at 5:30 am (0330 GMT), came after the death toll from Israeli air strikes rose to 34 since Tuesday. Islamic Jihad claimed a number of the dead as members.

Palestinian officials said eight members of the same family had been killed in an Israeli strike overnight, including five children.

Israel's military said the man killed in the strike in Deir al Balah in the central Gaza Strip was an Islamic Jihad rocket unit commander.

Relatives, neighbours and an Islamic Jihad spokesman disputed that, with some saying he had been a Palestinian Authority military police officer.

"This is a war crime. You are killing innocent children, sleeping at home," neighbour Adan Abu Abdallah told AFP.

Israeli military spokesman Jonathan Conricus told AFP: "He was an Islamic Jihad commander and he, like many others, have the tactic of hiding ammunition and military infrastructure in their own residence.

"Of course we try always to minimise the amount of non-combatants killed or injured."

- 'Ticking bomb' -

The escalation began early Tuesday with Israel's targeted killing of a top Islamic Jihad commander, Baha Abu al-Ata, who it accused of being behind rocket fire and other attacks.

Israel's military alleged he was planning more violence and called him a "ticking bomb," while one top security official said the strike was able to reach him in the bed where he slept, presumably with a drone.

The strike triggered almost immediate retaliatory rocket fire from Islamic Jihad at Israel, setting off air raid sirens and sending Israelis rushing to bomb shelters in the country's south and central regions.

Israel's military said some 450 rockets had been fired at its territory since Tuesday morning and air defences had intercepted dozens of them in fireballs high in the sky.

No Israelis were killed, though damage was caused and one rocket narrowly missed speeding cars on a busy highway. Israeli medics said they had treated some 63 people as of Wednesday night, all with mild injuries and almost half wth "stress symptoms."

Israel responded with air strikes, saying it targeted Islamic Jihad militant sites and rocket and missile-launching squads.

Unusually, it singled out Islamic Jihad rather than hold Hamas, the Islamist movement that rules Gaza, responsible for the violence.

Israeli analysts said it was a clear signal the army sought to avoid a wider conflict.

Hamas repeatedly said it would not abandon its ally, but it was faced with seeking to maintain a fragile truce with Israel that has seen tens of millions of dollars in Qatari aid flow into the impoverished Gaza Strip since last year.

Islamic Jihad initially declined all mediation, but apparently decided by Wednesday night it was ready to negotiate.

- Sensitive politics -

An Egyptian official said the ceasefire reached overnight included an agreement that Palestinian groups in Gaza work to prevent violence by demonstrators during weekly protests near the border fence.

In return, Israel agreed to stop hostilities and commit to a ceasefire during the weekly demonstrations, according to the official.

Israel did not confirm any of those claims.

Israeli Prime Minister Benjamin Netanyahu had not commented publicly on the ceasefire, but had on Wednesday said Islamic Jihad must stop its rocket attacks or "absorb more and more blows".

He added that Israel did not want a further escalation but was prepared to respond "without mercy."

The flare-up raised fears of a new all-out conflict between Israel and Palestinian militants in Gaza, who have fought three wars since 2008.

Islamic Jihad is the second-most-powerful militant group in the Gaza Strip after Hamas.

The flare-up came at a politically sensitive time for Israel, with no new government in place after a September election ended in deadlock.