Israel will refuse to agree a new truce with Hamas unless the release of captured soldier Gilad Shalit is part of the deal.

The decision, approved unanimously by a cabinet vote on Wednesday, came as both Israel and Hamas appeared to toughen their negotiating positions.

The indirect talks over a ceasefire, mediated by the Egyptian government, reached an apparent impasse this week despite an earlier agreement by the Hamas leadership in Gaza to link a prisoner exchange deal to a two-year truce.

However, Khaled Meshal, the Hamas leader in Damascus, opposed that concession and insisted that Israel open the crossings before any final agreement on prisoners.

Amos Gilad, Israel’s negotiator, has tried to hammer out a deal in Cairo whereby Israel would agree to the partial opening of the crossings before the talks on Mr Shalit resumed.

This strategy was backed by Defence Minister Ehud Barak but opposed by Prime Minister Ehud Olmert, who said that Mr Shalit’s release had to come first.

“It will be impossible to maintain the ceasefire in Gaza without solving the question of Shalit,” he said.

Mr Olmert’s position was supported by Yuval Diskin, the head of the Shin Bet security service, who argued that opening the crossings would mean that Israel had relinquished a crucial bargaining chip before any agreement regarding their captive soldier.

But Mr Olmert also faces intense pressure from the Shalit family and public demands for Israel not to hand the Palestinians any concessions before securing the release of the soldier captured in June 2006.

Mr Olmert would like to see Mr Shalit freed before he is replaced when a new coalition is formed in a few weeks by a new prime minister.

Mr Barak and Mr Gilad have privately criticised Mr Olmert, accusing him of indecision and of offending the Egyptian mediators.

The cabinet also decided that until an agreement was reached, the crossings into Gaza would only be opened intermittently to allow in humanitarian supplies.