Egyptian Foreign Minister Mohammed Kamel Amr said that a ceasefire between Israel and Hamas in and around the Gaza Strip will come into effect at 19:00 GMT (12:30 IST).
Kamel thanked all parties involved in brokering the truce as he made the announcement in a joint news conference with US Secretary of State Hillary Clinton.
"Israel has accepted the deal," according to a statement released from the office of Israeli Prime Minister Benjamin Netanyahu.
Under the ceasefire terms, Israel is to stop all aggression against the Gaza Strip from land, sea and air, including cross-border incursions and targeted killings. Palestinian factions are to cease all aggression from Gaza towards Israel, including rocket fire and attacks on the border, Al-Jazeera reported.
Twenty-four hours after the ceasefire takes effect, Israel will also be committed to opening of all border crossings and ease restrictions on movements of people and goods in and out of the enclave, it said.
For the truce to hold, "the rocket attacks [from Gaza] must end and a broader calm must return," Clinton said.
Israel launched its current offensive a week ago with the killing of Hamas military leader Ahmed Jabari.
"The United States welcomes the agreement today for a ceasefire. In the days ahead, the US will work with partners in the region to consolidate this progress," Clinton said.
Earlier, Israeli attacks on the Gaza Strip continued for an eighth day today as diplomatic efforts were under way to secure a ceasefire.
At least a dozen people were killed in Gaza today, according to medical officials, bringing the death toll to a total of 150 since Israel's military operation was launched.
Israel said it struck more than 100 targets, including a cluster of Hamas government buildings.
Clinton and UN chief Ban Ki-moon, who both met Egyptian President Mohamed Mursi, have been shuttling between Egypt, Israel and the occupied West Bank in a bid to bolster a proposed ceasefire agreement that Cairo brokered between Israel and the Hamas.
Netanyahu consulted with US President Barack Obama before agreeing to the ceasefire. Obama called on Netanyahu and commended him for agreeing to the Egyptian proposal for a ceasefire with Hamas.
"The President expressed his appreciation for the Prime Minister's efforts to work with the new Egyptian government to achieve a sustainable ceasefire and a more durable solution to this problem," the White House said in a statement in Washington after the telephone call between the two leaders.
Obama also called Egyptian President after the two sides agreed to end the bloodshed in the Gaza strip.
He commended Mursi for his effort on negotiating a ceasefire between Israel and Hamas.
Earlier, India, Brazil and South Africa had strongly condemned the ongoing violence between Israel and Palestine, stressing that the crisis can only be resolved through diplomacy and dialogue.
The IBSA nations urged the parties to immediately cease all violence and exercise maximum restraint to avoid taking any action that may further exacerbate the situation.
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