Israel's military said it had received Edan Alexander after the International Committee of the Red Cross said it had facilitated his safe transfer from 19 months of captivity to Israeli authorities.
Alexander was the last US citizen held by Hamas and Israel's Channel 12 said his condition was "low," without citing a source.
Al Jazeera television showed a photograph of him standing next to masked fighters and a Red Cross official.
Unlike in previous hostage releases, he was wearing civilian clothes.
Fighting halted at midday in the Gaza Strip after Israeli Prime Minister Benjamin Netanyahu said Israel would pause its operations to allow safe passage for the hostage release.
Hamas said it was freeing Alexander as a goodwill gesture to US President Donald Trump, who is visiting the region this week.
"Edan Alexander, American hostage thought dead, to be released by Hamas. Great news!" Trump wrote in capital letters on his social media platform earlier in the day.
Netanyahu said Alexander's release came thanks to Israel's military pressure in the Gaza Strip and political pressure by Trump.
The Israeli leader said he spoke with Trump on Monday and the US president expressed commitment to Israel, according to a statement by Netanyahu's office.
Netanyahu has said there will be no ceasefire and that plans to intensify military action in the Gaza Strip continue.
Witnesses in the Gaza Strip told Reuters the movement of aviation over the enclave by Israeli warplanes and drones had resumed after Alexander's handover.
The release, after four-way talks between Hamas, the United States, Egypt and Qatar, could open the way to freeing the remaining 58 hostages held in the Gaza Strip, 19 months after Hamas' attack on Israel on October 7, 2023.
Qatar and Egypt said Alexander's release was an encouraging step towards new truce talks.
Israel will send a delegation to Qatar on Thursday to discuss a new proposal aimed at securing further hostage releases, Netanyahu's office said.
Netanyahu has insisted that Israel's planning for an expanded military campaign in the Gaza Strip will continue, as one of his coalition partners, national security minister Itamar Ben-Gvir, said the war on Islamist militant Hamas must not end and aid should not be let into the Palestinian enclave.
"Israel has not committed to a ceasefire of any kind," Netanyahu's office said, adding that military pressure had forced Hamas into the release.
Gazan health authorities said an Israeli strike killed at least 15 people sheltering at a school on Monday before fighting paused.
Israel's military said it had targeted Hamas fighters there who were preparing an attack.
The global hunger monitor, the Integrated Food Security Phase Classification (IPC) said on Monday that half a million people in the Gaza Strip face starvation and there is a critical risk of famine by September.
Trump is due to visit Gulf states on a trip that does not include a stop in Israel but special envoy Steve Witkoff, who helped arrange the release, was expected in Israel on Monday, two Israeli officials said.
Alexander's family thanked Trump and Witkoff, saying in a statement that they hoped the decision would open the way for the release of the other remaining hostages.
"We urge the Israeli government and the negotiating teams: please don't stop," they said.
Israel's government has faced criticism over the deal to release Alexander, which laid bare the priority given to hostages able to rely on the support of a foreign government.
Einav Zangauker, whose son Matan is among 21 hostages still believed to be alive, said Netanyahu was choosing his political survival over ending the war.
Addressing Trump in a statement she read with other hostage families, she said: "The Israeli people are behind you. End this war. Bring them all home".
Netanyahu, who was due to testify in the latest session of his trial on corruption charges that he denies, has faced pressure from hardliners in his cabinet not to end the war.
Following a ceasefire agreement that halted fighting in the Gaza Strip for two months and allowed the exchange of 38 hostages for Palestinian prisoners and detainees in Israeli jails, Israel resumed its military campaign in the enclave in March.
Israeli forces invaded the Gaza Strip in retaliation for the Hamas-led assault on Israel in October 2023 in which 1200 people were killed and 251 taken hostage, according to Israeli tallies.
Since then, more than 52,000 Palestinians have been killed, health authorities in the Gaza Strip say, and large swathes of the enclave have been devastated.
