Israeli forces are said to have surrounded Gaza City's Al Shifa hospital, which they say sits atop an underground headquarters of Hamas militants.
Hamas, Gaza's ruling Islamist group, denies fighters are present and says 650 patients and 5,000 to 7,000 other displaced civilians are trapped inside the hospital grounds, under constant fire from snipers and drones.
It says 40 patients have died in recent days, including three premature babies whose incubators were knocked out.
A Hamas official in Beirut said 25 of Gaza's 35 hospitals were out of use because of Israel's assault.
Five weeks after Israel swore to destroy Hamas in retaliation for a cross-border assault by militants, the fate of Al Shifa has become a focus of international alarm, including from Israel's closest ally, the United States.
Ashraf Al-Qidra, Gaza's health ministry spokesman, reached by telephone inside the hospital compound, said there were about 100 bodies decomposing inside and no way to get them out.
"We are planning to bury them today in a mass grave inside the Al Shifa medical complex. It is going to be very dangerous as we don't have any cover or protection from the ICRC," he told news agency Reuters, referring to the International Committee of the Red Cross/Crescent.
"The men are digging right now as we speak."
Thirty-six babies are left from the neo-natal ward after three died. Without fuel for generators to power incubators, the babies were being kept as warm as possible, lined up eight to a bed.
Israel announced on Tuesday that it was offering portable, battery-powered incubators so the babies could be moved. But Mr Qidra claimed that so far no arrangements had been established to carry out any such evacuation.
"We have no objection to having the babies moved to any hospital, in Egypt, the West Bank or even to the occupation (Israeli) hospitals. What we care most about is the wellbeing and the lives of those babies," he said.
"The occupation is still besieging the hospital and they are firing into the yards from time to time."
Israel denies the hospital is under siege and says its forces allow exit routes for those inside. Medics and officials inside the hospital deny this and say those trying to leave come under fire. Reuters could not verify the situation independently.
Medical charity Medecins Sans Frontieres said shots were fired on Tuesday at one of its bases near Al Shifa, where MSF staff and their families, more than 100 people in total, were sheltering.
"They ran out of food last night," MSF said on X, formerly Twitter. "We have been trying to evacuate them for three days. MSF is asking the Israeli army and Hamas to provide safe passage... Thousands of civilians, medical personnel and patients are currently trapped inside hospitals and other sites under fire in Gaza City."
Israel vowed to wipe out Hamas after the militant group's fighters burst across the fence around the enclave and rampaged through Israeli towns killing civilians on Oct. 7. Israeli says 1,200 people were killed and around 240 were dragged back to Gaza as hostages in the deadliest day of its 75-year history.
But its response, including a total siege and constant bombardment of the crowded enclave, has killed many thousands of civilians and alarmed countries around the world. Israel says Hamas is to blame for harm to civilians because fighters hide among them; Hamas denies this.
Medical officials in Hamas-run Gaza say more than 11,000 people are confirmed dead from Israeli strikes, around 40 percent of them children, and countless others trapped under rubble. Around two thirds of Gaza's 2.3 million people have been made homeless, unable to escape the territory where food, fuel, fresh water and medical supplies are running out.
Ahmed El Mokhallalati, a surgeon, told Reuters by phone from inside Al Shifa that the main risk now was from decomposing bodies.
"We are sure that all kind of infections will be transmitted," he said. "Today we had a little bit of rain ... It was really horrible, nobody could even open a window, or just walk around the corridors with a really bad smell.
"Burying 120 bodies needs a lot of equipment, it can't be by hand efforts and by single person efforts. It will take hours and hours to be able to bury all these bodies."
Doctors performed surgery without any oxygen on Monday, he said, making general anaesthesia impossible.
Israel's military has released video and photos of what it said were weapons Hamas had stored in the basement of another hospital, Rantissi, specialising in cancer treatment for children. Hamas said the images were staged.