Nearly two years into the war in Gaza, Netanyahu faces mounting pressure to secure a truce to pull the territory's more than two million people back from the brink of famine and free the hostages held by Palestinian militants.
Israel's foe Hamas, whose October 7, 2023 attack triggered the war, denounced the plan to expand the fighting as a "new war crime".
Staunch Israeli ally Germany meanwhile took the extraordinary step of halting military exports out of concern they could be used in Gaza, a move Netanyahu slammed as a reward for Hamas.
Under the newly approved plan to "defeat" Hamas, the Israeli army "will prepare to take control of Gaza City while distributing humanitarian assistance to the civilian population outside combat zones", the premier's office said Friday.
Netanyahu in a post on X said "we are not going to occupy Gaza -- we are going to free Gaza from Hamas".
He said that the territory's demilitarisation and the establishment of "a peaceful civilian administration... will help free our hostages" and prevent future threats.
Israel occupied Gaza from 1967, but withdrew its troops and settlers in 2005.
Netanyahu's office said the cabinet had adopted "five principles", including Gaza's demilitarisation and "the establishment of an alternative civil administration that is neither Hamas nor the Palestinian Authority".
The plan triggered swift criticism from across the globe, with China, Turkey, Britain and numerous Arab governments issuing statements of concern.
United Nations Secretary-General Antonio Guterres called the Israeli plan a "dangerous escalation" that risks "deepening the already catastrophic consequences for millions of Palestinians".
Three diplomatic sources told AFP that the UN Security Council will meet on Saturday to discuss the plan.
- 'March of recklessness' -
Announcing the suspension of military shipments to Israel, German Chancellor Friedrich Merz said it was "increasingly difficult to understand" how the new plan would help achieve legitimate aims.
In Israel, there were mixed reactions to the cabinet's decision, while Defence Minister Israel Katz said the military had already begun preparing for its implementation.
The main campaign group for hostages' families also slammed the plan, saying it amounted to "abandoning" the captives.
"The cabinet chose last night to embark on another march of recklessness, on the backs of the hostages, the soldiers, and Israeli society as a whole," the Hostage and Missing Families Forum said.
Out of 251 hostages captured during Hamas's 2023 attack, 49 are still being held in Gaza, including 27 the military says are dead.
An expanded Israeli offensive could see ground troops operate in densely populated areas where hostages are believed to be held, local media have reported.
Some Israelis, meanwhile, offered their support.
"As they take control of Gaza, they will eliminate Hamas completely -- maybe not completely, but at least a good percentage of them," said Chaim Klein, a 26-year-old yeshiva student.
The Israeli army said last month that it controlled 75 percent of the Gaza Strip.
- 'We are human beings' -
Gaza residents said they feared further displacement and attacks as they braced for the next onslaught.
"They tell us to go south, then back north, and now they want to send us south again. We are human beings, but no one hears us or sees us," Maysa al-Shanti, a 52-year-old mother of six, told AFP.
Hamas on Friday said the "plans to occupy Gaza City and evacuate its residents constitutes a new war crime".
It warned Israel that the operation would "cost it dearly", and that "expanding the aggression means sacrificing" the hostages held by militants.
International concern has been growing over the suffering of Palestinians in Gaza, where a UN-backed assessment has warned that famine is unfolding.
The World Health Organization said at least 99 people have died from malnutrition in the territory this year, with the figure likely an underestimate.
Gaza's civil defence agency said a 19-year-old was seriously injured during the delivery of aid by an airdrop over Gaza City.
"There are daily injuries and fatalities caused by the heavy parcels falling on people's heads in densely populated areas," said civil defence spokesman Mahmud Bassal, adding that stampedes and overcrowding at aid drop sites frequently lead to casualties.
Bassal said Israeli strikes across Gaza on Friday killed at least 16 people.
Israel in recent months has eased some restrictions on aid entering Gaza, but the United Nations says the amount allowed into the territory remains insufficient.
Israel's offensive has killed over 61,000 Palestinians, according to Hamas-run Gaza's health ministry.
The 2023 attack on Israel resulted in the deaths of 1,219 people, according to an AFP tally based on official figures.
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