The Israeli walkout occurred just hours before a midnight deadline, leaving the fate of the negotiations in question and raising the possibility of a resumption of heavy fighting.
"The Cairo talks were based on an agreed premise of a total cessation of hostilities," Israeli government spokesman Mark Regev said. "When Hamas breaks the cease-fire, they also break the premise for the Cairo talks. Accordingly, the Israeli team has been called back as a result of today's rocket fire."
The breakdown dealt a harsh blow to nearly a week of Egyptian-led diplomacy meant to end weeks of fighting that has killed more than 2,000 Palestinians, most of them civilians, according to Palestinian and U.N. Officials. Sixty-seven Israelis, including three Israelis, have also been killed.
It has been the heaviest fighting between Israel and Hamas since the Islamic militant group seized control of Gaza in 2007.
More From This Section
Hamas is seeking an end to a seven-year Israeli-Egypt blockade that has ravaged Gaza's economy, while Israel wants guarantees that Hamas will disarm.
An Egyptian compromise proposal calls for easing the blockade, but not lifting it altogether and opening the territory's air and seaports as Hamas has demanded.
While the plan does not require Hamas to give up its weapons, it would give Western-backed President Mahmoud Abbas, whose forces were ousted by Hamas in 2007, a foothold back in Gaza, running border crossings and overseeing internationally-backed reconstruction. Abbas' presence would minimize friction with Israel and allow large amounts of international aid to flow into Gaza for reconstruction.