The Israeli cabinet approved the deal early Friday morning local time, roughly 24 hours after mediators announced the agreement with Hamas.
The deal calls for the release of Israeli hostages in exchange for Palestinian prisoners and the start of a phased withdrawal of Israeli troops from Gaza under US President Donald Trump's initiative to end the two-year war there.
"The government has just now approved the framework for the release of all of the hostages – the living and the deceased," Israeli Prime Minister Benjamin Netanyahu's English-language X account said.
Israelis and Palestinians alike rejoiced after the deal was announced, the biggest step yet to end two years of war in which more than 67,000 Palestinians have been killed, and return the last hostages seized by Hamas in the deadly attacks that started the assault.
Hamas' exiled Gaza chief Khalil Al-Hayya said he had received guarantees from the United States and other mediators that the war was over.
An Israeli government spokesperson said the ceasefire would go into force within 24 hours of government approval of the deal. After that 24-hour period, the hostages held in Gaza would be freed within 72 hours.
Twenty Israeli hostages are still believed to be alive in Gaza, while 26 are presumed dead, and the fate of two is unknown. Hamas has indicated recovering the bodies of the dead may take longer than releasing those who are alive.
Once the agreement is operating, trucks carrying food and medical aid will surge into Gaza to help civilians, hundreds of thousands of whom have been sheltering in tents after Israeli forces destroyed their homes and razed entire cities to dust.
Much could still go wrong. Even after the deal was signed, a Palestinian source said the list of hundreds of Palestinians to be released was not finalised.
The group is seeking freedom for some of the most prominent Palestinian convicts held in Israeli jails, as well as hundreds of people detained during Israel's assault.
Further steps in Trump's 20-point plan have yet to be discussed. Those include how the shattered Gaza Strip is to be ruled when the fighting ends and the ultimate fate of Hamas, which has so far rejected Israel's demands it disarm.
But the announcement of an end to fighting and return of hostages was greeted with jubilation.
"Thank God for the ceasefire, the end of bloodshed and killing," said Abdul Majeed Abd Rabbo in Khan Younis in southern Gaza.
"All of the Gaza Strip is happy, all the Arab people, all of the world is happy with the ceasefire and the end of bloodshed."
Einav Zaugauker, whose son Matan is one of the last hostages, rejoiced in Tel Aviv's so-called Hostages Square, where families of those seized in the Hamas attack that triggered the war two years ago have long assembled.
"I can't breathe, I can't breathe, I can't explain what I'm feeling ... it's crazy," she said.
In Gaza, Israeli attacks continued before the official start of the ceasefire, but there were far fewer fatalities than the scores killed on a daily basis in recent weeks.
Local health authorities reported seven dead in two separate Israeli strikes on Thursday.
Trump said he would head to the region on Sunday to possibly attend a signing ceremony in Egypt, and Israeli Knesset Speaker Amir Ohana invited him to address the legislative body, which would be the first such speech by a US president since 2008.
