Egyptian-brokered indirect negotiations between Israel and the Palestinians are taking place during a five-day lull in the fighting that is due to expire at midnight tomorrow.
The aim is to broker a long-term arrangement to halt over a month of bloody fighting which erupted on July 8 and has so far claimed 1,980 Palestinians lives and 67 on the Israeli side.
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"The Israeli delegation in Cairo is acting with a very clear mandate to stand firmly on Israel's security needs," said Netanyahu.
"Only if there is a clear answer to Israel's security needs, only then will we agree to reach an understanding."
The talks began today afternoon at the headquarters of Egyptian intelligence, with four Gaza officials, among them Hamas and Islamic Jihad delegates, due later the same day.
It was the first time the teams had sat down since Wednesday after the negotiators returned home for consultations with their respective political masters.
Cairo airport sources said the Israeli delegation arrived mid-morning from Tel Aviv, while a Palestinian team from Ramallah flew in around the same time via Amman.
Hamas's exiled deputy leader Mussa Abu Marzuk arrived from Doha.
In Gaza, although millions enjoyed a weekend free of the deadly fighting, residents are now facing other battles including the struggle to cope with a chronic water shortage.
And United Nations humanitarian chief Valerie Amos said during a visit to Iran that it will take "months to rebuild" UN hospitals, schools and shelters serving Palestinians in Gaza, damaged by the Israeli bombardment of the coastal territory.
A total of 97 UNRWA installations in the Gaza Strip, including health and food distribution centres as well as schools, have been damaged.
Israel, meanwhile, announced that Gaza fishermen barred from fishing since July 8 can resume their activities.
"As a sign of goodwill, Israel has allowed fishing off the Gaza Strip up to 3 nautical miles," a government official told AFP on condition of anonymity.
In Ramallah, Palestinian president Mahmud Abbas reiterated his commitment to the Egyptian proposal.
"Our goal is to stop fighting and we are committed to the Egyptian initiative and nothing else," he said.
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