Israel has come under heavy pressure from the US to curtail civilian deaths after concluding that its forces were likely to have been behind the shelling of a UN school.

In what amounted to the strongest and most explicit condemnation of Israel since the Gaza conflict began, President Barack Obama's press secretary on Thursday called the attack "totally unacceptable" and "totally indefensible". He also said the administration was urging Israel to do more to avoid civilian deaths and said US officials were taking issue with "specific military decisions" by Israel. "It is clear that we need our allies in Israel to do more to live up to the high standards they have set themselves."

The EU issued a similar statement.

US officials had initially declined to apportion blame for the shelling, even though the UN said all of the evidence pointed to Israel. On Thursday, after Israel conceded it was operating in the area and said it was possible that "stray Israeli fire" hit the school and killed 16 Palestinians, the White House shifted its stance.

The angry words from Washington came as Palestinian leaders prepared to hold talks in Egypt on Friday on a short ceasefire they hope will help end the three-week Israeli offensive, which has now killed some 1,400 people in Gaza. Prospects for success look deeply uncertain but Israel signalled that it could stop fighting without any agreement.

Disagreements were reported on Thursday over the composition of a Palestinian delegation ahead of the negotiations in Cairo, with Hamas officials insisting that there would be no truce until it was agreed to lift the seven-year blockade of the coastal territory by Israel and Egypt.

But there were also signs of possible readiness for a deal as Mahmoud al-Zahar, a senior Hamas leader, declared: "The Palestinian people will be marking their victory in the very near future." Khalil al-Haya, another Hamas official, said that if Israel wanted a way out of the crisis it had to accept Palestinian terms.

The team is likely to be headed by Mahmoud Abbas, the Palestinian president, along with other officials of the Ramallah-based Palestinian Authority. Islamic Jihad, another militant Gaza faction, will also be represented.

Al Sharq al-Awsat, a Saudi-owned paper, reported that the intention is to work towards a three or five-day ceasefire to be followed by negotiations in Cairo on a permanent agreement.

In Israel, attention focused on military operations in Gaza, the funerals of the latest of the 56 soldiers who have been killed, and the rockets which continued to be fired from the enclave despite Israeli claims that the Palestinian arsenal had now been heavily depleted.

And there was an uncompromising message about the terms of any truce. Binyamin Netanyahu, Israel's prime minister, said after a cabinet meeting that Israel would continue destroying the "terror tunnels" crossing from Gaza into Israel whether or not there was a ceasefire. "I will not accept any proposal that does not allow the army to complete this important mission for the people of Israel," Netanyahu said. It was the "first stage of the demilitarisation" of Gaza – a demand he claimed was supported by the US and EU.

Netanyahu's remarks came two days after Hamas released a video of fighters climbing out of a tunnel into Israel and attacking a base in a raid Israeli officials said claimed the lives of five soldiers.

Early on Thursday the army announced the call-up of another 16,000 reservists – despite calls for an immediate ceasefire.

Israeli officials briefed that a truce would have to be based on a proposal put forward by Egypt – suggesting that conditions proposed by Qatar and Turkey, both supporters of Hamas, would not be acceptable. Two senior Israeli security officials held consultations in Cairo on Wednesday, underlining close coordination between the two countries, but no details of their talks were released.

Israel Radio reported a senior army officer as saying that a ceasefire should allow Israel continued access to border areas of Gaza in order to allow it to destroy new tunnels dug once this bout of fighting was over. Tunnelling by Hamas had been set back five years, the unnamed officer claimed, adding that "scores" of its fighters were buried in tunnels that had been destroyed.

Hamas's tunnelling activities had gone on round the clock for months, he said. Israeli media also reported residents in communities near the Gaza border complaining that they had heard noises underground and reported them to the army but that investigations had not uncovered anything suspicious.

In New York, the UN security council was expected to call again for an immediate ceasefire in Gaza after the furious international condemnation of the attack on a UN school. Referring to that incident, and to a later attack, the EU said in a statement: "It is unacceptable that innocent displaced civilians, who were taking shelter in designated UN areas after being called on by the Israeli military to evacuate their homes, have been killed." The EU was "deeply concerned at the catastrophic humanitarian situation in Gaza" and called on all sides to "immediately allow safe and full humanitarian access for the urgent distribution of assistance".

Navi Pillay, the UN high commissioner for human rights, said she believed Israel was deliberately defying international law and that world powers should hold it accountable for possible war crimes. "This is why again and again I say we cannot allow impunity; we cannot allow this lack of accountability to go on." Hamas had also violated international humanitarian law by firing rockets indiscriminately into Israel, sometimes from densely-populated areas, Pillay said.