Israeli Prime Minister Benjamin Netanyahu on Thursday said he had ordered immediate negotiations aimed at freeing all the remaining hostages in Gaza, as Israeli troops hammered the territory's largest city ahead of a major planned offensive.

The call for renewed talks came a day after the defence ministry approved a plan authorising the call-up of roughly 60,000 reservists to help capture Gaza City, home to Hamas's final stronghold.

"I have come to approve the IDF's (military's) plans to take control of Gaza City and defeat Hamas," the prime minister said in a video statement filmed during a visit to the Gaza division's headquarters in Israel.

"At the same time, I have instructed to immediately begin negotiations for the release of all our hostages and the end of the war under conditions acceptable to Israel."

"These two matters -- defeating Hamas and releasing all our hostages – go hand in hand," Netanyahu said, without providing details about what the next stage of talks would entail.

Meditators have been waiting for days for an official Israeli response to their latest ceasefire proposal, which Hamas accepted earlier this week.

Palestinian sources have said the new deal involves staggered hostage releases, while Israel has insisted that any deal see all the captives freed at once.

Israel's plans to expand the fighting and seize Gaza City have sparked international outcry as well as domestic opposition, with the Red Cross joining the condemnation on Thursday, calling the moves "intolerable".

Ahead of the offensive, the Israeli military said the call-up of the reservists would begin in early September, adding the second phase of operation "Gideon's Chariots" had begun.

Earlier, Gaza City residents described relentless bombardments overnight.

"The house shakes with us all night long – the sound of explosions, artillery, warplanes, ambulances, and cries for help is killing us," Ahmad al-Shanti told AFP.

Another resident, Amal Abdel-Aal, said she watched the heavy strikes on the area, a week after being displaced from her home in Gaza City's Al-Sabra neighbourhood.

"No one in Gaza has slept -- not last night, not for a week. The artillery and air strikes in the east never stop. The sky flashes all night long," she added. (AFP)