As world efforts to end the fighting gathered pace, Israel said it killed 10 Hamas militants in an early morning gun battle in southern Israel after they used tunnels to get across the border.
At an urgent meeting on Gaza, the UN Security Council urged an "immediate cessation of hostilities" in a call echoed by US President Barack Obama in a telephone conversation with Israeli Prime Minister Benjamin Netanyahu.
With growing concern over the number of civilian deaths, Washington said it was dispatching Secretary of State John Kerry to Cairo for talks on an Egyptian ceasefire proposal, which was rejected by Hamas last week.
Following the deadliest day in Gaza in more than five years in which at least 140 Palestinians were killed, medics pulled another 45 bodies from the rubble early Monday, emergency services spokesman Ashraf al-Qudra said.
And 15 more Palestinians, were killed in a series of strikes across Gaza, one of which hit a house in the southern city of Rafah, killing seven children and two adults, Qudra said.
As the diplomatic efforts gathered steam, hundreds of people could be seen flooding out of the northern town of Beit Hanun, a day after many thousands fled an intensive Israeli bombardment of the eastern district of Shejaiya.
On Sunday, at least 72 people were killed in Shejaiya during a punishing Israeli operation which reduced much of the district to rubble and left charred bodies lying in the streets.
By Monday morning, a UN school on the outskirts of the district was packed to overflowing with people seeking shelter, many sleeping in the corridors.
In Gaza City's Shifa hospital, several families could be seen sleeping in gardens in the hope they would be safe from the bombing.
Since the Israeli operation began on July 8, huge numbers of Gazans have fled their homes, with more than 85,000 people taking shelter in 67 schools run by UNRWA, the UN agency for Palestinian refugees, a spokesman said.
Militants infiltrate Israel
The Israeli army said "more than 10" Hamas militants had been killed after infiltrating southern Israel through cross-border tunnels.
The army said "two terrorist squads" had managed to enter Israel through the tunnels, one of which was hit by an air strike.
Military radio said the second squad engaged in a fierce gun battle with troops in which several soldiers were wounded, without giving further details.
On Sunday, 13 Israeli soldiers were killed inside Gaza, raising to 18 the total number of soldiers killed since a ground operation began late on Thursday.
It was the army's heaviest losses in eight years and left Israel in mourning.
The attack was claimed by Hamas militants from the Ezzedine al-Qassam Brigades, which said it had carried out "an operation behind enemy lines in response to the massacre in Shejaiya."
Late on Sunday, the Qassam Brigades claimed it had captured an Israeli soldier it named as Shaul Aaron in a report that the army said it was checking, but which Israel's UN ambassador said was untrue.
Hamas militants captured Israeli soldier Gilad Shalit in 2006 and held him for more than five years before releasing him in 2011 in exchange for more than 1,000 Palestinian prisoners.
'Too many innocents dying'
Following its urgent overnight meeting, the Security Council expressed "serious concern" about the rising death toll and demanded "an immediate cessation of hostilities."
And UN chief Ban Ki-moon, who is currently in the region to bolster truce efforts, urged Israel to "exercise maximum restraint" saying: "Too many innocent people are dying."
Hamas leader Khaled Meshaal and Palestinian president Mahmud Abbas were to hold talks in Qatar on Monday on the quickening truce efforts, officials said.
So far, ceasefire proposals have been rejected by Hamas, which has laid out a long list of demands it wants Israel to agree to, including an end to its blockade of Gaza and the release of scores of prisoners.
Despite rising concern over the number of civilian casualties, Netanyahu has blamed Hamas, saying it was using innocent civilians "as human shields."
And he insisted Sunday that there was "very strong support" from the international community for Israel's operation.
Although Israel said earlier Sunday it was expanding its ground operation to destroy tunnels used by militants to carry out cross-border attacks and fire rockets, Defence Minister Moshe Yaalon suggested it could end within days.
There was no let-up in rocket and mortar fire by Gaza militants on Monday with 27 hitting Israel and four intercepted by the Iron Dome air defence system, the army said. There were no reports of casualties.
