The Israeli military said others would be released later.
It comes as Hamas released a list of 20 living hostages it said would be released and of more than 1900 Palestinian prisoners it said Israel would release, the key exchange of the breakthrough ceasefire after two years of war.
Israelis are preparing to welcome home the hostages from devastated Gaza and mourn the return of the dead.
US President Donald Trump was arriving in the region along with other leaders to discuss the US-proposed deal and postwar plans.
A surge of humanitarian aid was expected into famine-stricken Gaza, where hundreds of thousands of people have been left homeless.
While major questions remain about the future of Hamas and Gaza, the exchange of hostages and prisoners marked a key step towards ending the deadliest war ever between Israel and the militant group.
Major Israeli TV stations were airing special overnight broadcasts before the hostages' release as anticipation grew.
People began to gather near a large screen in Hostages Square in Tel Aviv before dawn.
The hostages' return caps a painful chapter for Israel.
Since they were captured in the October 2023 Hamas attack that ignited the war, newscasts have marked their days in captivity and Israelis have worn yellow pins and ribbons in solidarity.
Tens of thousands have joined their families in weekly demonstrations calling for their release.
As the war dragged on, demonstrators accused Prime Minister Benjamin Netanyahu of dragging his feet for political purposes, even as he accused Hamas of intransigence.
Last week, under heavy international pressure and increasing isolation for Israel, the bitter enemies agreed to the ceasefire.
The hostages will be handed to the Red Cross and then to the Israeli military, which will take them to the Reim military base to be reunited with families.
It is unlikely that the remains of up to 28 other hostages will be returned at the same time.
An international task force would work to find dead hostages who were not returned within 72 hours, said Gal Hirsch, Israel's co-ordinator for the hostages and the missing.
The timing has not been announced for the release of Palestinian prisoners.
They include 250 people serving life sentences for convictions in attacks on Israelis, as well as 1700 seized from Gaza during the war and held without charge.
The war began when Hamas-led militants launched a surprise attack on southern Israel on October 7, 2023, in which some 1200 people were killed and 250 taken hostage.
In Israel's ensuing offensive, more than 67,000 Palestinians have been killed, according to Gaza's health ministry.
The war has destroyed large swaths of Gaza and displaced about 90 per cent of its two million residents.
It has also triggered other conflicts in the region, sparked worldwide protests and led to allegations of genocide that Israel denies.
9°C