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Israel pulled its ground forces out of the southern Gaza Strip Sunday, media reports said, in a partial withdrawal six months into the devastating war sparked by the October 7 attacks.
But the military said a "significant force" will keep operating elsewhere in the besieged Palestinian territory, able "to conduct precise intelligence based operations".
Prime Minister Benjamin Netanyahu said Israel was just "one step away from victory" and vowed there would be no let-up in fighting until Hamas releases all hostages.
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Speaking as new truce talks were due to be held in Cairo, he told his cabinet that "there will be no ceasefire without the return of hostages. It just won't happen."
Netanyahu stressed that "Israel is ready for a deal, Israel is not ready to surrender".
Air strikes kept pounding Khan Yunis and Rafah during the night, eyewitnesses said.
The army said it withdrew its forces from southern Gaza after months of fighting there left in ruins the city of Khan Yunis, hometown of Hamas leader Yahya Sinwar.
"The 98th commando division has concluded its mission in Khan Yunis," the army told AFP. "The division left the Gaza Strip in order to recuperate and prepare for future operations."
An army official told the Haaretz daily that the troops pulled out after they had "dismantled Hamas' Khan Yunis brigades and killed thousands of its members.
"We did everything we could there."
The news of the partial withdrawal came on the day talks towards a truce and hostage release deal were expected to resume in Cairo, including US, Qatari and Egyptian mediators.
CIA chief Bill Burns and Qatari Prime Minister Sheikh Mohammed bin Abdulrahman bin Jassim Al-Thani will join Egyptian officials for indirect talks between the Israeli and Hamas delegations, Egypt's Al-Qahera News said.
Netanyahu had long threatened a ground offensive on far-southern Gaza's Rafah city, sparking global concern, including from Israel's top ally the United States.
Up to 1.5 million Palestinians are crowded into the area on the Egyptian border, many living in tents. Dozens left Rafah by foot, in cars and on donkey carts and returned to Khan Yunis on Sunday after the Israeli pullout, AFP images showed.
On Thursday, US President Joe Biden — angered by an Israeli strike that killed seven aid workers of a US-based food charity — told Netanyahu he wants to see a ceasefire and hostage release deal and ramped-up aid deliveries.
Biden — whose government is Israel's top arms supplier and political backer — also hinted at making US support for Israel conditional on curtailing the killing of civilians and improving humanitarian conditions.
Several aid trucks on Sunday entered southern Gaza through the Rafah crossing with Egypt, the drivers honking their horns as crowds ran after them, AFP TV footage showed.
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