Despite the vote in the security cabinet, Parliament must debate legislation on the compensation package.
The security cabinet later decided against a military response.
The prime minister met with his security cabinet for three hours today to discuss possible reprisals.
But the security cabinet opted to keep the current level of operations.
The agreement was then approved by the Israeli security cabinet.
Earlier in the day, Israel's security cabinet formally decided to continue the military operation, now nearly two weeks old.
He met tonight with a smaller group of ministers, known as the security cabinet, to consider further military responses.
But the security cabinet chose not to escalate military actions, at least for now.
In a statement, the security cabinet said the military would continue the "current security activity."
In Germany, the government held an emergency meeting of its security cabinet.