Israel's Prime Minister Benjamin Netanyahu has rejected Hamas's proposed ceasefire terms - saying "total victory" in Gaza is possible within months.
He was speaking after Hamas laid out a series of demands in response to an Israel-backed ceasefire proposal.
Mr Netanyahu said negotiations with the group were "not going anywhere" and described their terms as "bizarre".
Talks are continuing to try and reach some sort of deal.
"There is no other solution but a complete and final victory," Mr Netanyahu told a press conference on Wednesday.
"If Hamas will survive in Gaza, it's only a question of time until the next massacre."
Israel was expected to take issue with Hamas's counteroffer, but this response is a categorical rebuke, and Israeli officials clearly see an effort by Hamas to end the war on its terms as utterly unacceptable.
Senior Hamas official Sami Abu Zuhri told the Reuters news agency that Mr Netanyahu's remarks "are a form of political bravado", and show he intends to pursue the conflict in the region.
An Egyptian official source told the BBC that a new round of negotiations, mediated by Egypt and Qatar, is still expected to go ahead on Thursday in Cairo.
Egypt has called on all parties to show the necessary flexibility to reach a calm agreement, the source said.
And Mr Netanyahu's rejection of a "delusional" plan are in stark contrast to remarks from Qatar, which described Hamas's response as "positive."
Hamas put forward its counter-offer to a ceasefire proposal on Tuesday.
A draft of the Hamas document seen by Reuters news agency listed these terms:
Phase one: A 45-day pause in fighting during which all Israeli women hostages, males under 19, the elderly and sick would be exchanged for Palestinian women and children held in Israeli jails. Israeli forces would withdraw from populated areas of Gaza, and the reconstruction of hospitals and refugee camps would begin.
Phase two: Remaining male Israeli hostages would be exchanged for Palestinian prisoners and Israeli forces leave Gaza completely.
Phase three: Both sides would exchange remains and bodies.
The proposed deal would also see deliveries of food and other aid to Gaza increase. By the end of the 135-day pause in fighting, Hamas said negotiations to end the war would have concluded.
Around 1,300 people were killed during the Hamas attacks on southern Israel on 7 October last year.
More than 27,700 Palestinians have been killed and at least 65,000 injured by the war launched by Israel in response, according to the Hamas-run health ministry.
Israeli forces to push into Rafah
Mr Netanyahu also confirmed on Wednesday that Israeli forces have been ordered to prepare to operate in the southern Gaza city of Rafah - where tens of thousands of Palestinians have fled in order to escape the fighting.
Expanding the conflict into Rafah would "exponentially increase what is already a humanitarian nightmare" in the city, UN Secretary-General Antonio Guterres warned.
"We are afraid of the invasion of Rafah," one displaced person at the Rafah Crossing, near the border with Egypt, told BBC Arabic.
"We sleep in fear and sit with fear. There is no food, and the weather is cold."
The Israeli leader's comments are a blow to sustained push by the US to reach a deal that its top diplomat, Antony Blinken, described as "the best path forward" - even though he cautioned there was "still a lot of work to be done."
Mr Netanyahu's stance also highlights the continuing, fundamental mismatch between the US and Israel's plans for Gaza's future.
He is insisting on an entity where Israel maintains overall security control, and Gaza is run by local bodies with no connection to Hamas or any other group.
Washington's vision of the future includes a horizon with a Palestinian state.
The urgent question now is whether something can be salvaged to keep these talks going. If that happens, maybe there could be another exchange of hostages and prisoners, and a desperately needed humanitarian pause to allow more aid into the Gaza Strip.