Hamas announced an immediate ceasefire in Gaza and gave Israel, which had already declared a unilateral truce, a week to pull its troops out of the region.
There was shooting from both sides after their separate announcements, but broadly the ceasefire appeared to be gaining strength and Israeli troops began pulling out of Gaza.
Israeli prime minister Ehud Olmert said he wanted to withdraw troops from Gaza ‘as soon as possible’.
Troops and tanks were seen streaming back over the border from Gaza, all but ending combat after a 22-day conflict in which more than 1,300 Palestinians were killed. Ten Israeli soldiers and three civilians also died.
In Gaza, families began emerging from their places of hiding, including UN school compounds where some 45,000 people sought refuge during the fighting, and returning to their homes - some only to find them damaged or destroyed.
Hamas announced its ceasefire about 12 hours after Israel's own move and said its Islamist allies in Gaza would also adhere to it.
French President Nicolas Sarkozy - joined by the leaders of Germany, Britain, Spain, Italy and the Czech Republic as current president of the EU for talks with Mr Olmert - called on Israel to open Gaza's borders to aid as soon as possible.
Yet despite the signs of the ceasefire gaining momentum, there still remains no formal deal between Israel and Hamas.
Some 17 rockets hit southern Israel after the ceasefire Mr Olmert declared went into effect at 2am (midnight Irish time). Israel responded with two air strikes against launching sites.
At least three rockets struck southern Israel after Hamas said it was halting attacks, Israeli police said.
Summit on Gaza crisis
A summit on the Gaza crisis was held at the Egyptian Red Sea resort of Sharm el Sheikh today.
It was co-chaired by Egyptian President Hosni Mubarak and President Nicolas Sarkozy of France, and the attendance included UN Secretary-General Ban Ki-moon.
After the meeting, British Prime Minister Gordon Brown called for immediate withdrawal of Israeli soldiers from Gaza and an end to Palestinian rocket fire, as did others including Mr Sarkozy.
But Mr Mubarak, Jordanian King Abdullah II and Arab League chief Amr Moussa went further, calling for an end to the Arab-Israeli conflict this year.
Meanwhile, the Minister for Foreign Affairs, Micheál Martin, said the ceasefire should allow desperately-needed relief to reach the people of Gaza.
John Ging, head of the UN Relief and Works Agency in Gaza, said it will take time to rebuild Gaza following the three weeks of bombardment.
