The Israeli cabinet has approved a framework for the release of the hostages, according to Israeli Prime Minister Benjamin Netanyahu.
Hamas leaders had already accepted the deal at negotiations in Egypt early on Thursday morning, saying the United States has promised it will mean the war is over.
The Israeli government said hostages would be released on Monday, local time, with Palestinian prisoners sent back to Gaza and the West Bank as part of the deal.
US President Donald Trump has said the hostage release could take place on Monday or Tuesday, because of the difficulty of recovering some of the captives.
The Israeli government said the ceasefire would come into effect 24 hours after the cabinet approval, by which time the Israel military would have completed a partial withdrawal outside the major cities in Gaza.
The Israel Defense Forces said it had "begun operational preparations" to pull back to "adjusted deployment lines".
Israel continued bombing and firing in Gaza after the ceasefire deal was announced.
Israeli media said the IDF was pushing back Palestinians who were approaching their positions.
The Palestinian news agency WAFA said seven Palestinians were killed by Israeli fire on Thursday, with more dying in an Israeli strike on a residential building in the evening.
Hamas secures release of detained Palestinians
Hamas said it had secured the release of 250 prisoners serving life sentences in Israeli jails, 1,700 Palestinians detained after October 7 and all women and children in Israeli detention.
The Israeli government said high-profile political leader Marwan Barghouti, serving five life sentences for involvement in attacks against Israelis, would not be released.
It also said it will not be returning the bodies of Hamas leaders Yahya and Mohammad Sinwar.
There are more than 11,000 Palestinians in Israeli detention, according to data provided by the Israel Prison Service, 87 per cent of whom have never been charged or convicted.
Hundreds of trucks of aid to flow
Increased humanitarian aid is set to enter Gaza once the ceasefire comes into effect, at the same levels as the ceasefire implemented in January.
Tom Fletcher, head of the United Nations Office for the Coordination of Humanitarian Affairs, said the organisation would aim to send hundreds of trucks of aid into the enclave every day.
"We will scale up the provision of food across Gaza to reach 2.1 million people who need food aid and around 500,000 people who need nutrition," he said.
"Famine must be reverted in areas where it has taken hold and prevented in others."
US sending 200 troops to Israel to help monitor peace deal
The US is set to send about 200 troops to Israel to help support and monitor the Gaza deal, as part of a taskforce including partner nations, non-governmental organisations and private sector players.
The American taskforce is likely to include members of the militaries of Egypt, Qatar, Türkiye and the United Arab Emirates, according to a senior US official.
Their role will be to "oversee" and "observe" the ceasefire, to make sure there are no violations.
The taskforce is being talked about as a precursor to the "International Stabilization Force", which is part of the US's larger 20-point peace proposal.
Israeli President Isaac Herzog's office said US President Donald Trump would visit Jerusalem on Sunday. He has been invited to address the Israeli parliament.
The Israeli government said the deal was proof it had secured victory against Hamas in its lengthy retaliation for the October 7 attacks.
"From day one of this war, the prime minister laid out three objectives: the return of all our hostages, the defeat and dismantling of Hamas, and ensuring Gaza never poses a threat to Israel," government spokeswoman Shosh Bedrosian said.
"All of the prime minister's objectives have now been achieved."
