Musab al-Berim, a spokesman for Islamic Jihad in the Gaza Strip, said the cease-fire went into effect at 11:30 p.m. (9:30 p.m. GMT) on Monday evening, several hours after an earlier truce quickly unraveled.
Speaking to the Associated Press, al-Berim said the Islamic Jihad group would commit to the cease-fire "as far as the occupation (Israeli military) commit to it."
He said Egypt and United Nations mediators had negotiated the new deal, and nearly an hour later things appeared quiet on both sides.
Fighting began on Sunday after Israel's forces killed a militant it said was planting explosives along the border.
During two days of fighting, Israeli aircraft pounded dozens of targets in the Gaza Strip while Islamic Jihad militants bombarded southern Israel with heavy rocket fire, with some rockets getting through the Iron Dome defence system, one of which landed in an empty kindergarten playing area.
Israel also expanded its retaliation to Syria, where some of the Iranian-backed group's leaders are based, killing two more Islamic Jihad militants in an overnight airstrike.
As the cease-fire came into effect, Islamic Jihad released a statement saying it had completed its "retaliation" for Israel's killing of three members.
Earlier on Monday, Israel's Prime Minister Benjamin Netanyahu, who is locked in the final days of a divisive election campaign, ramped up his rhetoric.
He threatened Gaza's Hamas rulers with a stepped-up operation if the rocket fire continued.
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