Israel's military says it has carried out air strikes in the Gaza Strip in response to fresh rocket fire, hours before a ceasefire was set to expire.
Smoke could be seen rising from the Gaza Strip after what witnesses said was an Israeli air strike
"Terror targets" were hit after three rockets were fired towards the towns of Beersheba and Netivot, officials said.
A five-day ceasefire was extended for 24 hours at midnight while delegations from both sides tried to negotiate a deal to end weeks of fighting.
More than 2,080 people, most of them Palestinians, have died since 8 July.
"This rocket attack was a grave and direct violation of the ceasefire," said Mark Regev, a spokesman for Israeli Prime Minister Benjamin Netanyahu.
There was no immediate claim of responsibility from any of the Palestinian factions in Gaza, which is dominated by the Islamist movement Hamas.
But shortly beforehand Hamas spokesman Fawzi Barhoum had warned: "If Netanyahu doesn't understand... the language of politics in Cairo, we know how to make him understand."
A senior Israeli official told the BBC that the Israeli delegation had been instructed to leave the indirect talks and return to Israel after the attack.
A senior member of Palestinian Authority President Mahmoud Abbas's Fatah movement earlier said there had been "no progress on any point" in the negotiations and that the "circle of violence" might continue.
Palestinian negotiators said Israel was seeking guarantees that Hamas and other factions in Gaza would be disarmed, while the Palestinians were demanding an end to the Israeli and Egyptian blockades of Gaza.
Hamas has stated that it will not give up its weapons, while Israel has said it needs to maintain some control over Gaza's crossings to prevent the smuggling of weapons.
Members of Hamas' military wing showed journalists a tunnel underneath Gaza on Monday
Israel launched an offensive on Gaza, "Operation Protective Edge", on 8 July with the aim of ending rocket fire. It also sought to destroy tunnels dug under the frontier with Israel used by militants to launch attacks.
The Palestinian health ministry says that 2,016 Palestinians have been killed since it began, including 541 children and 250 women.
The Israeli authorities say 64 Israeli soldiers have been killed, along with two Israeli civilians and a Thai national.
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