Israeli Prime Minister Benjamin Netanyahu's office said he had ok'd a plan to attack the city on the southern edge of the shattered Palestinian enclave where more than half of its 2.3 million residents are sheltering after five months of war.
Global allies and critics have urged Netanyahu to hold off attacking Rafah, fearing mass civilian casualties. But Israel says it is one of the last strongholds of Hamas whom it has pledged to eliminate and that residents will be evacuated.
In Washington, White House national security spokesperson John Kirby said the US had not seen the Rafah plan, but would like to. He told a regular briefing a Hamas ceasefire-for-hostages proposal was within the bounds of what was possible and expressed cautious optimism about it.
Hamas has presented a Gaza ceasefire proposal to mediators and the US, which includes release of Israeli hostages in exchange for freedom for Palestinian prisoners, 100 of whom are serving life sentences.
A statement from Netanyahu's office on the Rafah attack plan said Hamas' demands for the release of hostages remained unrealistic, but an Israeli delegation would still head to Doha once the security cabinet had discussed its position.
The Israeli statement said the Israeli Defence Force was preparing operationally and for the evacuation of the population of Rafah.
It gave no time frame and there was no immediate evidence of extra preparations on the ground.
Negotiators failed this week to reach a ceasefire agreement in time for the Ramadan Muslim holy month. Washington and Arab mediators are still determined to reach a deal to head off an assault on Rafah and let in food to stave off starvation.
Senior Hamas official Sami Abu Zuhri accused Netanyahu of "manoeuvring ... to conduct more crimes of genocide."
"He isn't interested in reaching an agreement," he told Reuters.
Israel has rejected claims of genocide, saying it is purely focused on destroying all Hamas fighters.
There is increasing friction between Washington and Israel, which officials in President Joe Biden's administration say is waging war with too little care for civilians.
US Senate Majority Leader Chuck Schumer, the highest-ranking Jewish elected US official and a leader of Biden's Democratic Party, called on Thursday for Israelis to replace Netanyahu, whose hardline policies he said were wrecking Israel's international standing.
In the centre of Gaza City late on Friday, an Israeli air strike destroyed a seven-floor residential building, killing or wounding several people, the spokesman of the civil emergency service there said. He said emergency workers were searching the rubble for casualties.
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