Hamas had requested the Red Cross to ask Israel to allow it to search the destroyed tunnel for bodies
The Israeli army on Sunday said that it was holding the bodies of five Palestinian militants killed last week in a tunnel it blew up.
The tunnel in question stretched from the Gaza Strip into Israeli territory.
The Israeli military in its statement emphasised that the bodies found were in Israeli territory following an operation to blow up the tunnel which left 12 militants dead.
It did not state what conditions it would make for the return of the bodies. But Israeli public radio said that information would be sought on Israelis missing in Gaza.
Israelis and Palestinians have a long history of exchanging the bodies of dead soldiers and militants.
Hamas on Friday rejected the conditions set by Israel that would allow the militant group to retrieve the bodies of dead militants believed to be buried under the rubble of the tunnel.
The Israeli military on Thursday said it would not release the five bodies unless an agreement was made towards releasing the bodies of two slain Israeli soldiers which have been held by Hamas since 2014.
The tunnel which was destroyed by the Israeli army last week was constructed by the Palestinian militant Islamic Jihad group.
The group's tunnel, which begins in the Gazan city of Khan Younis, stretched to the Israeli Kibbutz Kissufim. It was blown up on the Israeli side of the border on Monday.
Gaza's health ministry reported that seven Palestinians, including two senior Islamic Jihad commanders, were killed as a result of the tunnel's explosion on Monday. Twelve others were reportedly injured.
Hamas had reportedly asked the International Committee of the Red Cross to coordinate with Israel to allow its men to enter the Gaza-Israel buffer security zone to search for the missing bodies inside the tunnel.
But the Israeli Defence ministry's coordinator of Government activities in the Occupied Territories refused the ICRC request.
Politicians and the families of the captured Israeli soldiers Hadar Goldin and Oron Shaul called on Israel to refuse the Hamas request unless a reciprocal deal was made.