The cabinet voted Monday to refrain from any action that could lead to an escalation in the south and to cooperate indirectly with the truce Hamas declared on Sunday. So far, the truce has largely held, although three rockets did hit southern Israel from the Gaza Strip on Monday.

The cabinet meeting began at about 11 P.M. Sunday and adjourned at about 3 A.M. Monday morning. The ministers were briefed by senior defense officials, but were not asked to approve any further military action. Instead, the meeting focused on ways to contain the situation and prevent an escalation.

Prime Minister Benjamin Netanyahu and Defense Minister Ehud Barak offered various arguments for why Israel must exercise restraint - its international isolation, the fact that the Iron Dome rocket interception system still offers only partial defense, and the fear of worsening the diplomatic crisis with Egypt. Under these circumstances, Netanyahu said, all-out war against Hamas-run Gaza would be inadvisable.

Prior to the cabinet meeting, several ministers had called for a harsher Israeli response to the rocket fire; and that is largely what prompted Netanyahu to convene the cabinet Sunday night: By having the full cabinet approve the decision to refrain from further military action, he hoped to block criticism from within the government.

What emerged most clearly from Netanyahu's and Barak's statements to the cabinet was that Israel lacks the international legitimacy needed for a large-scale operation in Gaza. The diplomatic crisis with Egypt further constrains Israel's freedom of action.

"The prime minister thinks it would be wrong to race into a total war in Gaza right now," one of Netanyahu's advisors said. "We are preparing to respond if the fire continues, but Israel will not be dragged into places it doesn't want to be."

Several Netanyahu aides detailed the constraints on Israeli military action, most of which are diplomatic.

"There's a sensitive situation in the Middle East, which is one big boiling pot; there's the international arena; there's the Palestinian move in the Untied Nations in September," when the Palestinians hope to obtain UN recognition as a state, one advisor enumerated. "We have to pick our way carefully."

But there were also military constraints, the aides noted. For one, the Israel Defense Forces do not yet have enough Iron Dome batteries to defend the home front.

"If we had even one more battery, we could defend another medium-sized city," one aide said. "That's precisely why we need to prepare instead of rushing into war."

Defense officials told the cabinet that so far, Hamas had not participated in the rocket fire; it had all come from smaller terrorist groups like the Popular Resistance Committees and Islamic Jihad, the officials noted.

Netanyahu, who has refrained from blaming Hamas for either last Thursday's cross-border attack from Sinai or the subsequent rocket fire from Gaza, insisted that Israel did not negotiate with Hamas over a cease-fire. The truce, he said, was a unilateral decision by Hamas.

Nevertheless, he added, Israel wouldn't escalate the situation as long as the south remained quiet.

"We won't fire first in Gaza; we won't strike the [smuggling] tunnels," explained an aide. "On the other hand, if we locate a terrorist cell en route to launching rockets or carrying out an attack on the [border] fence, we won't hesitate to strike at them."

Meanwhile, both Israel and the United States have been trying to stop the deterioration in Israeli-Egyptian relations that ensued when Israeli soldiers trying to repulse last Thursday's attack mistakenly killed several Egyptian policemen.

Maj. Gen. Amir Eshel, head of the IDF's Plans and Policy Directorate, flew to Cairo on Sunday to arrange for a joint probe into Thursday's events with senior Egyptian army officials. And yesterday, U.S. Assistant Secretary of State Jeffrey Feltman met with Egyptian officials in Cairo to stress the need to uphold the peace treaty with Israel and tighten Egypt's security control over Sinai.