The truce ended two days of intense fighting in which militants fired some 450 rockets towards Israel and Israeli aircraft carried out waves of strikes.
The fighting left 34 Palestinians dead and 111 injured in total, while 63 Israelis needed medical treatment.
The Israel Defense Forces (IDF) said 25 of the Palestinian fatalities were militants.
The escalation began on Tuesday when a senior commander of Palestinian Islamic Jihad (PIJ), Baha Abu al-Ata, and his wife were killed in an Israeli air strike.
The Israeli prime minister said Abu al-Ata was “responsible for most of the terror attacks in the last year from the Gaza Strip” and called him a “ticking bomb”.
PIJ spokesman Musab al-Buraim said early on Thursday that it had agreed to a ceasefire brokered by Egypt after Israel was “forced to accept the conditions set by the Palestinian resistance”.
Israel did not publicly confirm the ceasefire, but Foreign Minister Israel Katz told Army Radio that “quiet will be answered with quiet”.
He also said he considered it a “matter of success” that the dominant militant group in Gaza, Hamas, had not been involved in the hostilities.
Public Security Minister Gilad Erdan denied any concessions had been made to PIJ, tweeting that the group “wanted a ceasefire and it received no commitments in exchange”.
DF Spokesman Brig Gen Hidai Zilberman said its operation in Gaza, dubbed “Black Belt”, had achieved all of its objectives.
“With a combination of military personnel from a variety of units who specialize in SIGINT [signals intelligence], HUMINT [human intelligence], we were able to attack cells and close the circle against targets very quickly. That’s what killed 25 terrorists who were in the midst of carrying out hostile activity,” he added.
However, five rockets were launched from Gaza about five hours after the ceasefire came into effect, the IDF said. Two were intercepted by the Iron Dome air defence system.
There were no immediate reports of any injuries or damage.
In the late afternoon, rocket alert sirens sounded in Israeli communities near the Gaza border and the IDF said another rocket was shot down.
Meanwhile, Gaza’s health ministry said eight members of the Abu Malhous family, including five children and two women, were killed in an Israeli air strike on a house in Deir al-Balah, in central Gaza, before dawn on Thursday.
The ministry said the dead were all civilians. But the IDF insisted that the head of the family, Rasmi Abu Malhous, was a commander of a PIJ rocket-launching unit.
“He was an Islamic Jihad commander and he, like many others, had the tactic of hiding ammunition and military infrastructure in their own residence,” spokesman Lt Col Jonathan Conricus told AFP news agency. “Of course we try always to minimise the amount of non-combatants killed or injured.”
A neighbour, Mohammed Mazro, disputed the IDF’s account.
“They were children, civilians, not militants and they have nothing to do with politics,” he told AFP. “They were innocent people, asleep. We were shocked by four rockets landing on the tin house, this is not normal.”