Palestinian militants began handing over three Israeli hostages in Gaza on Thursday in return for 110 Palestinian prisoners to be freed under a phased agreement that halted fighting in the shattered coastal territory earlier this month.

An Israeli soldier, Agam Berger, wearing an olive green uniform, was led through a narrow ally between heavily damaged buildings and over piles of rubble in Jabalia in northern Gaza before being handed to the Red Cross.

“Our daughter is strong, faithful, and brave,” a statement from her family said. “Now Agam and our family can begin the healing process, but the recovery will not be complete until all the hostages return home.”

Two other hostages, Gadi Moses, 80, and Arbel Yahud, 29, both abducted from Kibbutz Nir Oz in the Hamas-led assault on Israel on October 7, 2023, were shown hugging one another in the presence of masked gunmen in black uniforms in a video released by Hamas ally Islamic Jihad.

Yahud was later shown being handed over to the Red Cross surrounded by a surging crowd and armed Palestinian militants at the site of the bombed house in the southern Gaza city of Khan Younis of Hamas leader Yahya Al-Sinwar, who was killed by Israel.

Dozens of militants thronged the site in a potent reminder that Hamas, which Israel has vowed to obliterate, still has a strong presence in Gaza despite heavy bombardment from the Middle East's most advanced military over more than 15 months.

“The killing of leaders only makes the people stronger and more stubborn,” senior Hamas official Sami Abu Zuhri said of Sinwar, who was filmed by an Israel drone badly wounded throwing a piece of wood at the device in his final defiance of Israel.

The Palestinian prisoners, who include 30 minors and some members of Palestinian groups convicted for their involvement in deadly attacks in Israel, will be taken to the West Bank or Gaza later in the day.

Five Thai nationals among those abducted in the 2023 Hamas attack on Israel are also expected to be freed by militants in Gaza in a separate agreement, Israel and Hamas have said.

Israelis gathered in what has become known as Hostages Square, a central square in Tel Aviv, where people have campaigned on behalf of hostages being held in Gaza, cheering and crying as they watched the release on a giant screen. The hostages will be taken to hospital for treatment.

Around 1,200 people were killed and more than 250 hostages were abducted in the Hamas attack in Israel, the bloodiest single attack on Jews since the Holocaust. Israel's military response has killed more than 47,000 Palestinians and laid waste to the enclave of 2.3 million people.

Around half the hostages were released the following month during the only previous truce, and others have been recovered dead or alive during Israel’s military campaign in Gaza.

Hundreds of thousands of Gazans, most displaced repeatedly during the conflict, have returned to their neighbourhoods in the north, where the fighting was most intense. Many have found their homes to be uninhabitable and basic goods in short supply.

Israel still lists 89 captives in Gaza, with around 30 declared dead in absentia.

In the course of the war triggered by the Hamas attack, Israel has killed leaders of Hamas and Lebanon's Hezbollah, striking major blows against Iran’s network of proxies in the Middle East. The fall of Iran-backed Syrian president Bashar al-Assad was also a boost for Israel.

Israeli forces have stepped up operations in another Palestinian territory, the West Bank, since the Gaza ceasefire came into effect, saying they are targeting militants there.