The two sides have blamed each other for the impasse.
In their second day of truce talks in Cairo with Egyptian and Qatari mediators on Sunday, Hamas negotiators maintained their stance that any truce agreement must end the war, Palestinian officials said.
Israeli officials have not travelled to Cairo to take part in indirect diplomacy, but on Sunday Netanyahu reiterated Israel's aim since the start of the war almost seven months ago - to disarm and dismantle the Palestinian Islamist movement Hamas for good or else endanger Israel's future security.
Hamas leader Ismail Haniyeh has accused Benjamin Netanyahu of "sabotaging" mediators' efforts. (AP PHOTO)
The prime minister said Israel was willing to pause fighting in Gaza to secure the release of hostages still being held by Hamas, believed to number more than 130.
"But while Israel has shown willingness, Hamas remains entrenched in its extreme positions, first among them the demand to remove all our forces from the Gaza Strip, end the war, and leave Hamas in power," Netanyahu said.
"Israel cannot accept that."
In a statement released just after Netanyahu's, Hamas chief Ismail Haniyeh said the group was still keen on reaching a comprehensive ceasefire that ended the Israeli "aggression", guaranteed Israel's withdrawal from Gaza, and achieved "a serious" deal to free Israelis being held hostage in exchange for the release of Palestinian prisoners.
Haniyeh blamed Netanyahu for "the continuation of the aggression and the expansion of the circle of conflict, and sabotaging the efforts made through the mediators and various parties".
The war began after Hamas stunned Israel with a cross-border raid on October 7 in which 1200 people were killed and 252 hostages taken, according to Israeli tallies.
More than 34,600 Palestinians have been killed, 29 of them in the past 24 hours, and more than 77,000 have been wounded in Israel's assault, according to Gaza's health ministry.
The bombardment has devastated much of the coastal enclave and caused a humanitarian crisis.
Israel and Hamas are trying to negotiate an end to the war in Gaza and return of Israeli hostages. (AP PHOTO)
As the talks were under way, residents and health officials in Gaza said Israeli planes and tanks continued to pound areas across the Palestinian enclave overnight, killing and wounding several people.
Earlier on Sunday, a Palestinian official told Reuters the Cairo negotiations were "facing challenges because the occupation (Israel) refuses to commit to a comprehensive ceasefire" but added that the Hamas delegation was still in Cairo in the hope mediators could press Israel to change its position.
Qatar, where Hamas has a political office, and Egypt are trying to mediate a follow-up to a brief November ceasefire amid international dismay over the soaring death toll in Gaza and the plight of its 2.3 million inhabitants.
Egyptian sources said CIA Director William Burns, who has also been involved in previous truce talks, arrived in Cairo on Friday.
Washington - which, like other Western powers and Israel, brands Hamas a terrorist group - has urged it to enter a deal.
Israel has given a preliminary nod to terms that one source said included the return of between 20 and 33 hostages in exchange for the release of hundreds of Palestinian prisoners and a truce of several weeks.
That would leave about 100 hostages in Gaza, some of whom Israel says have died in captivity.
The source, who asked not to be identified by name or nationality, told Reuters their return could require an additional deal.
Thousands of Israelis protested on Saturday, demanding Prime Minister Benjamin Netanyahu accept a ceasefire agreement with Hamas that would see the remaining hostages brought home.
