Israel will set up a "humanitarian corridor" for the Gaza Strip, Prime Minister Ehud Olmert's office has said.

The move has come after aid agencies complained of a mounting crisis for the 1.5 million Palestinians.

The measure was proposed by Israeli military chiefs and will entail granting periodic access to various areas of the strip to allow Palestinians to stock up on vital goods.

An Olmert spokesman, Mark Regev, described the measure as a "special status to allow the transfer of people, foodstuffs and medicines" and said it could be implemented on Wednesday.

Meanwhile, the US has called for an "immediate" ceasefire in Gaza after 42 Palestinians were reported dead in an Israeli strike at a United Nations-run school.

The US State Department said the ceasefire should be "durable, sustainable and not time limited".

The latest round of deaths came as hundreds of terrified Palestinians were taking shelter at al-Fakhora school in Jabalya refugee camp after fleeing fierce fighting between Israeli soldiers and Hamas fighters.

In a separate attack earlier in the day, three Palestinians were killed in an airstrike on another school run by the United Nations Relief and Works Agency.

Director of operations Pierre Kraehenbuehl said: "We are dealing with a full-blown major crisis in humanitarian terms. The situation of the people in Gaza is extreme and traumatic.

"We call on the parties, in particular on Israel, to do more to allow the Palestinian Red Crescent and other medical workers to carry out their work and save lives."

At least 720 Palestinians, including 130 militants, have been killed since the offensive began. Nine Israelis, including three civilians hit in Palestinian rocket attacks, have died in the conflict.

Many of the Gaza Strip's 1.5 million people lack food, water or power and hospitals are struggling to cope with the casualties of the conflict.

The latest fatalities in the 11-day-old conflict come after Israel warned that fighting in Gaza could get worse before its mission against Hamas is complete.

Palestinian witnesses said Israeli forces have pushed into Khan Younis in southern Gaza.

Prime Minister Gordon Brown has also urged both sides to reach an immediate ceasefire. Mr Brown said it was vital that the international community, including the Arab League, worked together to find a workable solution to the problem.

He said: "This is a very dangerous moment, I think everybody around the world is expressing grave concern. What we've got to do almost immediately is to work harder than we've done for an immediate ceasefire."

US President George W Bush has insisted that any ceasefire to end the Gaza crisis must include provisions to prevent Hamas from continuing to use the coastal strip to fire rockets into Israel.

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