“Our forces have begun to enter the southern Gaza Strip,” an Israeli spokesman said. The ground incursion was heralded by a series of air raids, destroying two bridges along the main north-south highway and knocking out the transformers at a power station, plunging the territory into darkness.

Ehud Olmert, the Israeli Prime Minister, promised a “comprehensive and protracted” military operation unless Gilad Shalit, the 19-year-old soldier captured on Sunday, were freed. A military official said that Mr Olmert had authorised a “limited operation” in southern Gaza, targeting “terrorist infrastructure”.

Israeli troops began taking up positions in two locations east of the Gaza town of Rafah under the cover of tank shells, according to witnesses and Palestinian officials.

As convoys of Israeli tanks dug in north of Gaza and armoured bulldozers constructed sand berms along the border, Palestinians hastily built defences against attack.

In northern Gaza, from where Palestinian militants have regularly fired rockets into Israeli towns, fighters put up barricades in Jabalya refugee camp, while Islamic Jihad fighters further south posed with rocket-propelled grenades, mortars, AK47s, bomb belts made of ball bearings and explosives packed into disinfectant bottles.

The men conceded that they had nothing to match Israel’s F16 fighters and Merkava tanks. But, one said: “We have exploding bodies.”

Condoleezza Rice, the US Secretary of State, pleaded for restraint. Egypt moved 2,500 troops to Gaza’s southern border to prevent a mass exodus of Palestinians, and urged Hamas to release Corporal Shalit.

The military moves came as Hamas executed a dramatic shift in policy to reach an agreement that implicitly recognises Israel. The militant Palestinian group’s U-turn could see the Hamas-led Government — anathema to Israel and the West — replaced within weeks by a national unity coalition.

As the military wing of Hamas took joint responsibility for kidnapping the Israeli soldier, its political wing was ending its power struggle with Mr Abbas by apparently accepting a national unity plan that the President had threatened to put to a referendum.

Details of the agreement remained unclear, but Palestinians hoped that the prospect of the secular Fatah party and other factions joining the Government might end international sanctions and make it possible for Mahmoud Abbas, the moderate President, to restart negotiations with Israel.

Hamas has long advocated the destruction of Israel, but the plan calls for a Palestinian state on the West Bank and Gaza territories captured by Israel in 1967 — implicitly recognising Israel’s existence in the rest of historic Palestine.

However, the original document, drawn up by Palestinian prisoners from all factions, does not mention a two-state solution or Israel’s right to exist. Its already ambiguous language may also have been watered down in recent talks.

Walid Awad, a spokesman for Mr Abbas, said that the President would insist on any new government accepting the three international demands that have been made of Hamas: recognising Israel, renouncing violence and abiding by previous agreements.

“This is the basic point on which the President and Fatah have concentrated — that its programme has to be acceptable to the international community,” Mr Awad said.

Mushir al-Masri, a rising star in Hamas, again made clear that while his group acknowledged the reality of Israel’s existence it did not recognise the Jewish State’s legitimacy.

He also said that it had agreed only to “focus” future attacks in the West Bank and Gaza, not to “confine” them to the occupied territories.

Israel, meanwhile, dismissed the agreement as an irrelevance as long as an Israeli soldier remained captive. Mark Regev, an Israeli Foreign Ministry spokesman, said: “It’s a tragedy that the responsible Palestinian leadership was not giving its full attention to the release of our soldier. We really are at the edge of a cliff. If he is not released we will be forced to take action to bring about his release.”

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