Rocket attacks on Israel and airstrikes on Gaza have ended after Egypt helped broker a truce between both sides.
A ceasefire between Israel and Hamas has begun following 11 days of fighting that have left more than 200 dead - the vast majority of them Palestinians.
Prime Minister Benjamin Netanyahu's office announced the ceasefire and a security cabinet statement called it "mutual and unconditional".
Hamas had confirmed that the truce would begin at 2am on Friday (midnight UK time).
Boris Johnson said he welcomed news of the ceasefire.
In a tweet, the prime minister said: "Leaders in the region must now work to find a durable solution to the Israeli-Palestinian conflict that prevents terrorism, ends the cycle of violence and delivers a sustainable and just peace."
As the ceasefire took effect, Palestinians left their homes and returned to the streets of Gaza. Some shouted "Allahu akbar", while others whistled from their balconies.
Cars packed the roads, with drivers honking their horns and waving flags from the windows. Some men fired rifles into the air, while others set off firecrackers.
Mosque loudspeakers hailed what they described as "the victory of the resistance achieved over the occupation during the battle of the Sword of Jerusalem".
One man clutching an AK-47 assault rifle told the Reuters news agency: "Our fingers are on the triggers, and we are ready to fight again, but now we will celebrate with our people."
The ceasefire came a day after US President Joe Biden called for a "significant de-escalation" and followed mediation bids by Egypt, Qatar and the UN.
Speaking from the White House after the truce was announced, Mr Biden sent his "sincere condolences to all the families, Israeli and Palestinian, who have lost loved ones" in the fighting.
At least 230 Palestinians have been killed, according to Gaza health officials, while 12 in Israel have died.
Mr Biden said Israel's Iron Dome defence system, developed in collaboration with the US, had saved "countless lives" since the crisis began and that he had pledged his "full support" to Mr Netanyahu to help replenish it and ensure his country's security in future.
The Iron Dome was used to intercept many of the thousands of rockets Hamas launched at Israel, whilst Israel retaliated with days of heavy airstrikes on the Gaza Strip.
Mr Biden said that the US would work with the UN and other international partners to provide "rapid humanitarian assistance" and assist with "reconstruction efforts" in Gaza.
"We will do this in full partnership with the Palestinian Authority, not Hamas, in a manner that does not permit Hamas to simply restock its military arsenal," he said.
"I believe the Palestinians and Israelis equally deserve to live safely and securely and enjoy equal measures of freedom, prosperity and democracy."
The UK's foreign secretary, Dominic Raab, said: "The UK welcomes the announcement of a ceasefire in Israel and Gaza, an important step to ending the cycle of violence and loss of civilian life.
"Hamas must end all attacks on Israel. It is also now important for Israel to facilitate rapid humanitarian access in and out of Gaza."
Both sides appear to be framing the ceasefire as a victory.
The Israeli cabinet announcement said the Egypt-brokered ceasefire had been agreed unanimously and that the campaign had made "great achievements" - some of them "unprecedented".
It also appeared to leave the door open for a resumption of fighting if the ceasefire is not honoured, adding: "The political leaders emphasised that the reality on the ground will determine the future of the campaign."
Cairo has said it will send two delegations to monitor the ceasefire.
Hamas' Osama Hamdan said the group - viewed as a terror organisation by many countries - had obtained guarantees from mediators that the attacks on Gaza would stop.
A statement said its "resistance" was "a new victory and a new equation".
It also claimed to have "obtained guarantees" over the Sheikh Jarrah neighbourhood in Jerusalem and al Aqsa mosque - the issues largely blamed for starting the fighting.
Israel's high-tech missile defence system has helped keep its casualties comparatively low, shooting down many of the rockets in mid-air.
Gaza has suffered heavy damage and TV pictures have captured the destruction of several high-rise towers which Israel said housed military targets.
Some 65 children have been killed, according to Gaza's health ministry.
Israel has repeatedly insisted it goes to great lengths to avoid civilian casualties, including giving warning of strikes, and claims Hamas uses people as "human shields".
The dead in Israel include a five-year-old boy, a 16-year-old girl and a soldier.
Hamas - designated a terrorist organisation by countries including the US and UK - and militant group Islamic Jihad said at least 20 fighters were killed, but Israel put it at least 130.
Eiv Izyaev, a software engineer who lives in Tel Aviv, said: "It's good that the conflict will end, but unfortunately I don't feel like we have much time before the next escalation."
The aerial bombardment means Palestinians now have limited or no access to water, according to the UN and aid agencies.
Hamas now faces the daunting challenge of rebuilding in a territory already suffering from poverty, widespread unemployment and a raging coronavirus outbreak.
Gaza was already an impoverished region but officials said electricity was down to three to four hours per day, with 16,800 housing units damaged.
About 1,800 are unfit to live in and 1,000 were destroyed, according to the housing ministry.
The World Health Organisation said Israeli attacks have damaged at least 18 hospitals and clinics - with one health facility destroyed. Nearly half of essential drugs have also run out.
Meanwhile, Save the Children said 50 schools have been damaged across the area, and at least six have been destroyed. The advocacy group added that the education of almost 42,000 children will be disrupted while repairs take place.
The UK government has said it will provide a £3.2m aid package for civilians in Gaza.
The first rockets were fired after a Hamas deadline expired following days of clashes between police and Israeli Arabs in Jerusalem's Old City and around al Aqsa mosque compound.
Tensions were also high over the Sheikh Jarrah neighbourhood, where Jewish settlers are trying to remove Palestinians from properties the government considers historically theirs.
Mr Netanyahu has come in for criticism from some political rivals - with one calling the ceasefire "embarrassing".
Sky's correspondent Mark Stone, who is in the region, said the elusive two-state solution was as far away as ever but that both sides are likely to gain politically.
Prime Minister Netanyahu can portray himself as the "defender of the nation" after previously fighting for his political life, said Stone.
Hamas, meanwhile, will look to gain an advantage over Fatah - which runs the West Bank - in claiming to be the defender of the Palestinian cause.
UN Secretary-General Antonio Guterres said Israeli and Palestinian leaders have a responsibility to address the root causes of the conflict.
He added: "Gaza is an integral part of the future Palestinian state and no effort should be spared to bring about real national conciliation that ends the division."