JERUSALEM (CNN) -- Israel has declared a unilateral cease-fire in the fighting in Gaza beginning at 2 a.m. Sunday (7 p.m. ET Saturday), Israeli Prime Minister Ehud Olmert said.
"We can say that the conditions have been brought about that enable us to say that the aims that we laid down for the operation have been completely achieved, if not more than that, " Olmert said. "Hamas has been dealt a very serious blow."
But Olmert said Israel is prepared to respond if Hamas militants continue fighting in the Palestinian territory.
"If foes decide to continue to fight against us, then we will be ready and we shall consider ourselves justified in replying," he said. "If Hamas still is not able to correctly evaluate the blow that has been inflicted on it, if it continues to attack us, it will be surprised at Israel's determination.
"I do not suggest that Hamas or other terrorist organizations try us."
"Hamas' military machine has been substantially destroyed," the official added. "They have been given a sufficient deterrence that they will think twice before attacking again."
The announcement followed a Cabinet meeting meant to vote on the basics of a plan that could end the fighting in Gaza. It also came a day after Israeli and U.S. diplomats signed an agreement designed to stop arms smuggling into the Palestinian territory through tunnels.
Israel launched an offensive in Gaza just over three weeks ago, with the stated intent of stopping rockets from being fired from the territory into southern Israel by Hamas fighters.
The expected cease-fire announcement comes amid mounting international pressure to end the fighting.
In a televised speech Saturday, Egyptian President Hosni Mubarak called on Israel to end military operations and withdraw from Gaza. He dismissed the idea of an international force based in Egypt, saying he would "never accept" a foreign presence on Egyptian soil.
U.N. Secretary-General Ban Ki-moon also reiterated his call for a cease-fire during a speech before the Lebanese parliament Saturday.
"The level of violence in Gaza is unprecedented," the U.N. chief said. "The Israeli aerial and land offensives against Hamas targets are inflicting heavy civilian casualties, widespread destruction and tremendous suffering for the entire region." 
The three-week conflict has killed 1,203 people in Gaza and injured more than 5,000 more, many of them Palestinian civilians, according to medical sources in Gaza City. They said 410 children have died.
On the Israeli side, 10 soldiers and three civilians have been killed and more than 200 soldiers have been wounded since the fighting began, an Israel Defense Forces spokesman said Saturday.
Fighting continued as the IDF attacked 50 targets between Friday night and Saturday morning, including eight missile-launching sites and 70 tunnels along the Egyptian border. The IDF says the tunnels were being used by Hamas to smuggle weapons into Gaza.
Two children were killed in an Israeli artillery attack at a U.N. school north of Gaza City early Saturday.
"This yet again illustrates that there is no place safe in the Gaza Strip," said Chris Gunness, a U.N. spokesman, speaking of the attack. "This fighting has to stop, because innocent people, women and children, who are taking refuge in neutral U.N. buildings are discovering that there is nowhere safe."
Four IDF soldiers were seriously wounded early Saturday by mortar fire in Gaza, according to an IDF statement.
Hamas has said a cease-fire alone is not enough.
"We are working in every direction so we can achieve our objectives in stopping the aggression, lifting the blockade, opening the crossings, and the compensation of our people and the rebuilding of the Gaza strip," said Hamas delegation spokesman Salah Bardwill.
Israeli Defense Ministry official Amos Gilad remained in Cairo on Friday, discussing the cease-fire plan. A Hamas delegation was also in the Egyptian capital, talking with leaders trying to hammer out a temporary truce.
In other diplomatic efforts, the state of Qatar held an emergency summit Friday in an attempt to find a unified Arab voice on Gaza. The meeting brought together several Arab and Muslim leaders, including the presidents of Iran and Syria and the leader of Hamas, Khaled Meshaal.
Friday evening, the U.N. General Assembly voted 142-4 to call on Israel to abide by a January 8 resolution by the U.N. Security Council.
The resolution, which called for an immediate cease-fire by both sides in the conflict, had been universally ignored.
Israel and the United States were among the countries voting against Friday's effortCNN's Ben Wedeman, Paula Hancocks, Elise Labott, Caroline Faraj, Mohammed Jamjoom and Arie Bell contributed to this report.
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