The enemies were expected to sign the agreement at noon in the region (0900 GMT) in the Egyptian beach resort of Sharm el-Sheikh where they negotiated the biggest step yet taken to end two years of devastating warfare.
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A source briefed on details of the agreement said Israeli hostages may be released as soon as Saturday and troops will begin withdrawing from Gaza within 24 hours.
Israel's security cabinet and government are due to hold meetings on the agreement at 5 p.m. Israel time (1400 GMT).
Palestinians and the families of Israeli hostages broke into wild celebrations after news emerged of the pact.
In Gaza, where most of the more than 2 million people have been displaced by Israeli bombing, young men applauded in the devastated streets, even as Israeli strikes continued.
'ALL OF THE GAZA STRIP IS HAPPY'
"Thank God for the ceasefire, the end of bloodshed and killing," said Abdul Majeed Abd Rabbo in Khan Younis in southern Gaza. "I am not the only one happy, 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."
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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 sparked the war two years ago have gathered to demand their return.
"I can't breathe, I can't breathe, I can't explain what I'm feeling ... it's crazy," she said, speaking in the red glow of a celebratory flare.
"What do I say to him? What do I do? Hug and kiss him," she said. "Just tell him that I love him, that's it. And to see his eyes sink into mine ... It's overwhelming โ this is the relief."
Still, Gaza residents said Israeli strikes on three Gaza City suburbs continued overnight and in the morning hours of Thursday, residents said. Lines of smoke rose over Shejaia, Tuffah and Zeitoun in the early hours of Thursday, though there were no immediate reports of casualties.