The Egyptian foreign minister announced on Wednesday that Israel and Hamas have agreed a ceasefire deal after eight days of violence that have seen around 150 lives lost.
It comes hours after twenty-one people were injured in a bus bomb a block away from the headquarters of the Israeli Defence Force (IDF) in Tel Aviv, the first significant terror incident in six years. In its aftermath more raids were carried out in Gaza, killing 13.
The conflict has seen 130 Palestinians and five Israelis die
But Egyptian foreign minister Kamel Amr said the ceasefire would begin at 7pm GMT on Wednesday evening.
US Secretary of State Hillary Clinton said it was "a critical moment for the region." She thanked Egypt's new president Mohammed Morsi for his "personal leadership in de-escalating the situation and ending the violence."
"There is no substitute for a just and lasting peace," she said.
"The US welcomes the agreement today for a ceasefire in Gaza - for it to hold the rocket attacks must end and a broader calm must return.
"In the days ahead the US will work with partners across the region to consolidate this progress, improve conditions for the people of Gaza, provide security for the people of Israel."
An Israeli security officer stands next to a blown up bus in Tel Aviv
A Whitehouse statement said: "Barack Obama commended Israeli prime minister Benjamin Netanyahu for agreeing to the Egyptian ceasefire proposal - which the President recommended the Prime Minster do - while reiterating that Israel maintains the right to defend itself."
A statement from Benhamin Netanyahu's office, reported by Aljazeera, said: "A short while ago Prime Minister Benjamin Netanyahu spoke with President Barack Obama and agreed to his recommendation to give a chance to an Egyptian proposal for a ceasefire and thereby give an opportunity for the stabilisation of the situation and a calming of it."
It comes a week after Operation Pillar of Defence began with Israel assassinating the head of Hamas' military wing Ahmed Said Khalil al-Jabari.