* Gaza militants fire rockets at Israel as truce expires
* Hamas rejects truce extension
* But says it will continue negotiations in Cairo
* Israel says it intercepts rocket over southern Israel (Adds Palestinian details, Gaza families, rockets)
By Nidal al-Mughrabi and Ori Lewis
GAZA/JERUSALEM, Aug 8 (Reuters) - Palestinian militants in the Gaza Strip resumed rocket fire into Israel on Friday after Egyptian-mediated talks in Cairo failed to extend a 72-hour truce in a month-long war.
As rocket-warning sirens sounded in southern Israel, the military said that since the truce expired Hamas had fired at least 18 rockets from Gaza and Israel's "Iron Dome" interceptor system brought down two. No injuries or damage were reported.
Gaza militants said they had fired a total of 10 rockets on Friday. An Israeli security official said flight operations at Tel Aviv's Ben-Gurion airport, potentially within range of some rockets, were suspended for 45 minutes as the truce expired.
Despite warnings by Israel that it would respond forcefully to renewed rocket salvoes, there was no immediate Israeli military action in the Gaza Strip, where heavy civilian casualties and destruction during fighting against militants in packed residential areas have raised international alarm.
Israel had earlier said it was ready to agree to an extension as Egyptian go-betweens pursued talks with Israeli and Palestinian delegates in Cairo on ending the war that has devastated the Hamas-controlled Gaza Strip.
A Hamas spokesman said Palestinian factions had not agreed to extend the truce, but would continue negotiations in Cairo.
The Palestinians had wanted Israel to agree in principle to demands which include a lifting of a blockade on the Gaza Strip, the release of prisoners and the opening of a sea port.
The armed wing of Hamas released a statement late on Thursday warning Palestinians negotiators not to agree to an extension unless Israelis offered concessions.
The Israelis have shown little interest in easing their naval blockade of Gaza and controls on overland traffic and airspace, suspecting Hamas could restock on weapons from abroad.
Israeli Strategic Affairs Minister Yuval Steinitz, speaking on Army Radio, raised the prospect of Israel relaunching a ground operation it halted on Tuesday and "taking control of the Gaza Strip in order to topple the Hamas regime".
But Prime Minister Benjamin Netanyahu has shown little inclination to do so.
In Gaza, some families who had returned to their homes in the northern town of Beit Hanoun during the ceasefire gathered up their belongings and headed back to the United Nations shelters where they had sought refuge over the past few weeks.
Some families in eastern Gaza, who had pitched tents near their wrecked houses, had also left the area.
Gaza officials say the war has killed 1,875 Palestinians, most of them civilians. Hamas said on Thursday it had executed an unspecified number of Palestinians as Israeli spies.
Israel says 64 of its soldiers and three civilians have died in the fighting that began on July 8, after a surge in Palestinian rocket salvoes into Israel.
It had expended its air and naval bombardment of the Gaza Strip into a ground offensive on July 17, and pulled its infantry and armour out of the enclave on Tuesday after saying it destroyed more than 30 infiltration tunnels dug by militants.
Hamas refusal to extend the ceasefire could further alienate Egypt, whose government has been hostile to the group and which ultimately controls Gaza's main gateway to the world, the Rafah border crossing.
The announcement that the truce would not be extended came a few minutes after it expired at 0500 GMT after lengthy talks that continued in Cairo through the night and into the morning.
Palestinian negotiators from factions including Hamas, Islamic Jihad and Fatah left their luxury hotel for talks with Egyptian intelligence at 9.30 p.m. on Thursday evening, returning more than six and a half hours later looking subdued and saying no deal had yet been reached.
Palestinian officials paced the lobby, speaking on their phones and holding meetings, trying to reach a final decision as the deadline approached.
A source at Cairo airport said the Israeli delegation left shortly before the truce expired. He said the Israeli visit had lasted nine hours, longer than the previous two visits this week, as Egyptian mediators pushed the two sides to renew the truce.
There was no immediate comment from Egypt, which has positioned itself as mediator but has struggled to clinch a deal.
(Additional reporting by Stephen Kalin and Maggie Fick in Cairo, Allyn Fisher-Ilan and Ori Lewis in Jerusalem; Writing by Giles Elgood in Jerusalem; Editing by Jeffrey Heller)
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