US President Donald Trump has hailed an “incredible historic breakthrough” after he and world leaders signed a Gaza ceasefire deal amid jubilant and emotional reunions.

“This took 3000 years, can you believe it? And it’s going to hold up,” said Trump after penning his name on the document at a summit in Egypt, alongside the leaders of Egypt, Turkey and Qatar.

“We’ve achieved what everybody said was impossible, at long last, we have peace in the Middle East.

“It’s so beautiful to see a new and beautiful day is rising. And now the rebuilding begins.”

Also at the summit were representatives from nearly three dozen countries. Israeli Prime Minister Benjamin Netanyahu was absent, blaming a Jewish holiday, and Hamas was not invited.

Earlier, the final 20 living Israeli hostages were released by Hamas as part of the agreement and reunited with their loved ones in emotional scenes.

Video footage captured tearful embraces as Israeli families came face-to-face after two years of anguish.

In exchange, Israel released 2000 Palestinians prisoners and detainees, 250 of whom were serving life or long sentences. Palestinians rushed to welcome them as the buses rolled into Gaza and the West Bank.

But the promised return of the remains of 28 dead Israeli hostages was not fulfilled and already threatens the fragile peace. Hamas released only four bodies.

Addressing the Israeli parliament after the hostage release (and before flying to Egypt), Trump said the “long and painful nightmare is finally over”.

“After two harrowing years of darkness and captivity, 20 courageous hostages are returning to the glorious embrace of their families. And it is glorious,” he said.

“Twenty-eight more precious loved ones are coming home at last to rest in this sacred soil for all of time.”

“This is now a very exciting time for Israel and for the entire Middle East, because all across the Middle East, the forces of chaos, terror and ruin that have plagued the region for decades now stand weakened, isolated and totally defeated.

“A new coalition of proud and responsible nations is emerging.”

In Tel Aviv, families and friends of the hostages who gathered in a square broke into wild cheers as Israeli television channels announced the first group of hostages was in the hands of the Red Cross.

Tens of thousands of Israelis watched the transfers at public screenings across the country.

Israel released the first photos of hostages arriving home, including one showing 28-year-old twins Gali and Ziv Berman embracing as they were reunited.

Hostages previously released had said the twins from Kfar Aza were held separately.

The photos of the first seven hostages released on Monday (local time) showed them looking pale but less gaunt than some of those freed in January.

Earlier, while Palestinians awaited the release of hundreds of prisoners held by Israel, an armoured vehicle flying an Israeli flag fired tear gas and rubber bullets at a crowd.

The prisoners being released 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.

A busload of freed Palestinian prisoners upon their arrival in the Gaza Strip. Photo: AAP

While major questions remain about the future of Hamas and Gaza, the exchange of hostages and prisoners has raised hopes it marks the end of the deadliest war ever between Israel and the militant group.

The ceasefire is also expected to be accompanied by a surge of humanitarian aid into Gaza, parts of which are experiencing famine.

The Israeli hostages freed on Monday (local time) were the last still alive in captivity from 251 seized in the Hamas-led attacks of October 7, 2023, that killed 1200 people and triggered the war.

The ceasefire and partial Israeli withdrawal agreed last week halted one of Israel’s biggest offensives of the war, an all-out assault on Gaza City that was killing scores of people per day.

Since then, huge numbers of Palestinians have been able to return to the ruins of homes in the Gaza Strip, swathes of which were reduced to a wasteland by Israeli bombardment that killed 68,000 people.

Formidable obstacles remain, even to securing an enduring ceasefire, much less to bringing a wider, more durable peace. Among the immediate issues still to be resolved: Recovering the remains of another 26 Israeli hostages believed to have died and two whose fates are unknown.

Aid supplies must be rushed into the enclave, where hundreds of thousands of people face famine. UN aid chief Tom Fletcher underlined the need to “get shelter and fuel to people who desperately need it and to massively scale up the food and medicine and other supplies going in”.

Beyond that, crucial issues have yet to be resolved, including how to govern and police Gaza, and the ultimate future of Hamas, which still rejects Israel’s demands to disarm.

The Gaza War has also reshaped the Middle East through spillover conflicts, with Israel imposing punishing damage in a 12-day war against Iran and campaigns against Tehran’s regional allies, including Lebanon’s Hezbollah and Yemen’s Houthis.

Trump has presented his plan to end the war in Gaza as the catalyst for a wide regional peace settlement.

-with AAP/Reuters