Three Israeli hostages have been reunited with their families as Palestinians returned to their bombed-out neighbourhoods with the start of a ceasefire suspending a 15-month-old war that has devastated Gaza and inflamed the Middle East.

In Tel Aviv, hundreds of Israelis cheered and wept in a square outside the defence headquarters as a live broadcast from Gaza showed the three hostages getting into a Red Cross vehicle surrounded by Hamas fighters.

The Israeli military said Romi Gonen, Doron Steinbrecher and Emily Damari had been reunited with their mothers and released a video showing them in apparent good health. 

"I would like you to tell them, Romi, Doron and Emily – an entire nation embraces you. Welcome home," Prime Minister Benjamin Netanyahu told a commander by phone.

Sheba Medical Center said all three women were in stable condition. They were among more than 250 people abducted and 1200 killed in a Hamas raid on Israel on October 7, 2023, Israel has said.

Released British-Israeli hostage Emily Damari embraces her mother, Mandy. – Reuters

One of those watching was Shay Dickmann, whose cousin was found slain by her Hamas captors in August.

"I'm excited, I was so nervous, that they would come safe and alive to their mothers' hands," Dickmann said. "They were in the hands of terrorists for 471 days, three young women." 

The Israeli military shared video showing their families gathered in what appeared to be a military facility crying out in emotion as they watched footage of the handover to Israeli forces in Gaza before they were brought back into Israel.

"Their return today represents a beacon of light in the darkness, a moment of hope and triumph of the human spirit," the Hostages and Missing Families Forum said.

They were later flown to a hospital in Tel Aviv in a helicopter that Israeli media reported was piloted by the head of the Israeli air force.

Pictures shared by the families showed the three women embracing their mothers at a reception centre, with Emily Damari beaming broadly and waving her bandaged hand at family on the other end of a mobile phone video call. Emily lost two fingers when she was shot the day she was abducted.

Israelis celebrate the release of thee three hostages. – AP

After a nerve-wracking morning, waiting to hear whether Emily would be one of the three hostages freed on Sunday, her friends breathed a sigh of relief.

"We didn't have any sign of life from her for a whole year and this is the first time we are seeing her," said Guy Kleinberger.

"We are seeing her walking on her two feet and we are just waiting here to hug her and say how much we love her."

The release of the three women, the first of 33 hostages due to be freed from Gaza under phase one of the deal, is in exchange for 90 Palestinian prisoners held in Israeli jails.

Israel released the 90 Palestinian prisoners on Sunday. There were celebrations as buses carrying the Palestinian prisoners arrived in Ramallah on the West Bank, where thousands of people waited to welcome them.

Those freed from Israeli prisons included 69 women and 21 teenage boys from the West Bank and Jerusalem, according to Hamas.

Doron Steinbrecher embraces loved ones at Sheba Medical Center in Israel. – Reuters

The Israeli hostages were taken in one of the most traumatic episodes in Israel's history, when Hamas gunmen attacked a string of communities around the Gaza Strip in the early hours of October 7, 2023, killing around 1200 civilians and soldiers and abducting 251 hostages – men, women, children and elderly.

But amid hope among many Israelis that the six-week ceasefire marks the beginning of the end to the war, there is deep unease about the uncertainty surrounding the remaining 94 hostages still held in the Gaza Strip.

"The ceasefire is something that I hope will work out," said Tomer Mizrahi, in Sderot, a town in southern Israel within sight of Gaza that was attacked on October 7.

"But as I know Hamas, you cannot even trust them one per cent."

Images of Hamas police emerging on to the streets as the ceasefire took effect underscored how far Israel remains from its originally stated war aims of destroying the Islamist group that has ruled in Gaza since 2007.

Released Israeli hostage Romi Gonen is embraced by her mother, Meirav. - Reuters

"I'm torn," said Dafna Sharabi from Beit Aryeh-Ofarim, a Jewish settlement in the occupied West Bank. "On the one hand there's a ceasefire to strengthen the forces, to rest from all the madness, on the other, maybe it's not the time," she said.

"They should have been eliminated, wiped out," she said. "My son was on reserve duty for a year over there ... and he sees all the Gazans returning, Hamas returning its forces to all the places he fought in."

The truce allowed Palestinians to return to bombed-out neighbourhoods to begin rebuilding their lives, while relief trucks delivered much-needed aid. Elsewhere in Gaza, crowds cheered Hamas fighters who emerged from hiding.

After 15 months of war, Gaza lies largely in ruins. Israel's campaign has killed almost 47,000 Palestinians, according to the Palestinian health ministry and displaced most of the two million people who live in the enclave.

But for many in Israel, the war will not be over while Hamas still stands and there have been a series of rallies opposing the ceasefire as a sell-out that abandons men of military age taken captive, who are not in the first batch of 33 hostages.

Chaotic scenes in Gaza during transfer of three hostages to the Red Cross. – AP

National Security Minister Itamar Ben-Gvir has already resigned and his fellow hardliner Bezalel Smotrich has also opposed the deal and said he has been reassured that it is not the end of the war.

The Israel Democracy Institute said its latest Israeli Voice Index, conducted just before the deal was agreed, found 57.5 per cent of Israelis in favour of a comprehensive agreement that would see all hostages back in return for ending the war. Twelve per cent supported a partial hostage release in return for a temporary ceasefire.

Amid the mix of emotions, for some, a sense of exhaustion outweighed any concerns about the future.

"We have been waiting for this for a long time. We wanted it to be an absolute victory, I hope we get that absolute victory," said Shlomi Elkayam, who owns a business in Sderot.

"There are pros and cons, but in the end we are tired of it all. We are tired and we want everyone here at home."

The truce calls for fighting to stop, aid to be sent in to Gaza and 33 of the nearly 100 remaining Israeli and foreign hostages to go free over the six-week first phase in return for nearly 2000 Palestinian prisoners held in Israeli jails. Many of the hostages are believed to be dead.

Jubilation outside Sheba Medical Center in Israel as released hostages arrive. – AP

In the north of the Gaza Strip, Palestinians picked their way through a devastated landscape of rubble and twisted metal that had been bombed into oblivion in the war's most intense fighting.

"I feel like at last I found some water to drink after being lost in the desert for 15 months," said Aya, who said she had been displaced from her Gaza City home for more than a year.

The first phase of the truce took effect following a three-hour delay during which Israeli warplanes and artillery pounded the Gaza Strip.

Displaced Palestinians make their way past rubble as they return to their homes. – Reuters

That last-minute blitz killed 13 people, Palestinian health authorities said. Israel blamed Hamas for being late to deliver the names of hostages it would free, and said it had struck terrorists. Hamas said the holdup in providing the list was technical.

"Today the guns in Gaza have gone silent," US President Joe Biden said on his last full day in office.

He welcomed a truce that had eluded US diplomacy for more than a year.

"It was a long road," Biden said. "But we've reached this point today because of the pressure Israel built on Hamas, backed by the United States."

There is no detailed plan in place to govern Gaza after the war, much less rebuild it. Any return of Hamas will test the patience of Israel, which has said it will resume fighting unless the militant group is fully dismantled.

The truce took effect on the eve of Monday's inauguration of US President-elect Donald Trump. Trump's national security adviser-designate, Mike Waltz, said that if Hamas reneges on the agreement, the United States would support Israel "in doing what it has to do".

"Hamas will never govern Gaza. That is completely unacceptable," he said.

Buildings lie in ruins following a ceasefire between Israel and Hamas in the northern Gaza Strip. – Reuters

The streets in shattered Gaza City were already busy with groups of people waving the Palestinian flag and filming the scenes on their mobile phones. Several carts loaded with household possessions travelled down a thoroughfare scattered with rubble and debris.

Ahmed Abu Ayham, 40, a Gaza City native sheltering in Khan Younis, said that while the ceasefire may have spared lives, the losses and destruction made it no time for celebration.

"We are in pain, deep pain and it is time to hug one another and cry," he said.

In a pocket of Rafah that was relatively unscathed, Ahmed Abou Mohsen, 20, and his family returned to their abandoned home and unpacked bags of clothes, jerry cans and mattresses from an open-backed truck.

"It is an indescribable feeling, a complete joy," he said, adding that neighbours whose homes had been destroyed would not share their happiness.