Prime Minister Benjamin Netanyahu's office said Israel was preparing to initiate the 'first stage' of Donald Trump's peace plan.
Netanyahu's government had told the Israeli Defense Forces to stop its invasion of Gaza City and to reduce activity in Gaza 'to a minimum,' Israeli Army Radio reported.
The IDF order to halt offensive operations marks a remarkable U-turn in the war against Hamas since the terrorist group's invasion of Israel on October 7 two years ago.
They have been ordered to only act if in defense and will stop their plan to occupy the city and evacuate remaining residents.
It comes after Hamas announced it has agreed to release all Israeli hostages and return the remains of the deceased under Donald Trump's peace plan for Gaza.
'In light of the Hamas response [to the Trump peace plan], Israel is making preparations for the immediate implementation of the first phase of the Trump plan which is the immediate release of all of the hostages,' Netanyahu said in a statement.
'We will continue to fully cooperate with the president and his team in order to end the war in accordance with the principles that Israel laid out and which are in line with President Trump's vision.'
On Friday afternoon, Trump posted a video celebrating the deal, though he similarly was waiting to get it 'in concrete' with Hamas and Israel.
He thanked Qatar, Egypt, Saudi Arabia, Jordan and Turkey alongside others for having 'helped me put this together.'
'So many people fought so hard, this is a big day, we'll see how it all turns out, we have to get the final word down in concrete,' he said.
'Most importantly, I look forward to having the hostages come home to their parents and having some of the hostages, unfortunately you know the condition they're in, come home likewise to their parents, because their parents wanted them just as much as if that young man or young woman were alive.'
He called the deal brokered between the two sides 'maybe unprecedented' and said it was 'a special day.'
'Thank you all and thank you all to those great countries that helped, we were given a tremendous amount of help. Everybody was unified in wanting this war to end and seeing peace in the Middle East and we're very close to achieving that,' Trump added.
The announcement comes just hours after the US president threatened to unleash 'all hell' on the jihadists if they did not agree to his peace proposal which was backed by Netanyahu at the White House on Monday.
'The movement announces its approval to release all occupation prisoners, alive and dead, according to the exchange formula mentioned in President Trump's proposal,' Hamas said in a statement.
The terrorists also agreed to hand over administrative control of Gaza to an independent body of Palestinian technocrats. It claimed those technocrats will be 'based on Palestinian national consensus and Arab and Islamic support.'
Trump responded on his Truth Social platform that he believes Hamas are acting in good faith and demanded that Israel 'immediately stop the bombing of Gaza so that we can get the hostages out.'
'Based on the Statement just issued by Hamas, I believe they are ready for a lasting PEACE,' the president said.
The terror group rejected Trump's proposed chairmanship of a 'Board of Peace' that would rule over Gaza, with other leaders such as ex-British prime minister Tony Blair suggested as members. It also refused to completely disarm.
Hamas chief Mousa Abu Marzouk told Al Jazeera: 'We will never accept anyone who is not Palestinian to control the Palestinians. We can't bring someone like Tony Blair to be governor in Gaza because this man, he destroyed Iraq'.
The Islamists said that other elements of Trump's 20-point peace plan regarding the future of Gaza 'will be discussed through a comprehensive Palestinian national framework in which Hamas will participate and contribute responsibly.'
The jihadists praised Trump in its announcement, writing: 'Hamas appreciates the Arab, Islamic, and international efforts, as well as the efforts of US President Donald Trump, calling for stopping the war on the Gaza Strip, exchanging prisoners, immediate entry of aid, rejecting the occupation of the Strip, and rejecting the displacement of our Palestinian people from it.'
Twenty hostages are thought to still remain in Hamas captivity, as well as the bodies of another 28 it has refused to send home to Israeli families since its barbaric attack on October 7, 2023.
Hamas' statement comes a few hours after Trump issued a warning on Truth Social demanding the group accept his peace plan outlined earlier this week.
Trump threatened that 'all hell' will break out on the militants if they did not accept his plan by 6pm on Sunday. The deal includes that all remaining hostages are released within 72 hours of an agreement.
Trump wrote on Truth Social on Friday: 'Hamas has been a ruthless and violent threat, for many years, in the Middle East! They have killed (and made lives unbearably miserable), culminating with the October 7th MASSACRE, in Israel, babies, woman, children, old people, and many young men and women, boys and girls, getting ready to celebrate their future lives together.'
Trump met Netanyahu earlier this week at the White House along with some of the Israeli PM's top team, and agreed on a new peace deal for Gaza.
The White House released a 20-point plan, which included increasing aid to Gaza and an economic development proposal that includes preferred tariffs and access rates.
Hamas is pushing back against disarming, according to Arab mediators in Doha, Qatar, stating that they must retain defensive capabilities.
The terror organization said it would be willing to handover offensive weapons to Egypt and the United Nations for storage.
Hamas has also reiterated its demand for a timeline for Israel's withdrawal from Gaza.
Previous attempts to pressure the Islamists into agreeing a peace deal, including threats from US envoy Steve Witkoff, have failed to yield an outcome.
Negotiations almost collapsed last month after Israel's strike on Qatar, which has been a crucial mediator in the discussions.
Since then, Trump has managed to gain support from Netanyahu as well as the key Arab power brokers in the region.
