Police officer Ran Gvili's remains have been identified and will be returned for burial, the military said in a statement.
Israel has said that it will reopen the Gaza Strip's Rafah border crossing with Egypt, the enclave's main gateway to the world, once Gvili's remains are returned or the search operation for his body concludes.
A government spokesperson had no immediate comment when asked when the border crossing would be reopened.
The Palestinian committee of technocrats backed by the US to administer Gaza has said the border would open this week.
Prime Minister Benjamin Netanyahu called it "an incredible achievement" for Israel and its soldiers, telling Israeli media that "I promised we would bring everyone home and we have brought everyone home".
Footage aired on Israeli news channels on Monday showed dozens of soldiers arm in arm, purportedly at the site in the Gaza Strip where the body was discovered, singing a Hebrew song expressing Jewish hope and faith.
Another image from the enclave showed what appeared to be a casket draped in the Israeli flag, surrounded by soldiers.
In social media posts on Monday, Gvili's mother Talik called her son a hero.
Gvili had been held in the Gaza Strip since he was killed at Kibbutz Alumim during Hamas' attack on southern Israel on October 7, 2023.
Gvili was off duty on October 7, recovering from an injury, when he was killed fighting the militants.
Hamas and Israel agreed to a ceasefire in October under pressure from regional powers and Trump, who called the deal a first step toward a "strong, durable and everlasting peace".
Gvili was one of the 251 hostages seized and taken to the Gaza Strip by militants during the October 2023 attack.
At the time of the deal, 48 hostages remained in the Gaza strip, 28 of them believed dead, including Gvili.
In a statement, Hamas spokesman Hazem Qassem said the discovery of Gvili's remains confirms Hamas' commitment to the US plan to end the war.
"We will continue to uphold all aspects of the agreement, including facilitating the work of the national Gaza administration and ensuring its success," Qassem said, referring to the committee of technocrats.
with AP
