The deal was brokered by Egypt, and received the approval of Israeli Prime Minister Ehud Olmert and Defense Minister Ehud Barak late last night. The ceasefire will come into force at 6:00 a.m. (03:00 GMT), and is set to last for six months.
Hamas confirmed an agreement had been reached on Tuesday evening after an announcement by Egyptian mediators.
In the run-up to the announcement, Israeli forces continued air strikes in Gaza, killing six militants earlier on Tuesday. Hamas fighters have been launching regular rocket attacks from the enclave into Israeli border towns.
Israel closed off Gaza border crossings in January this year and imposed restrictions on essential supplies in an attempt to pressure Hamas to halt rocket attacks against Israeli border towns.
Israeli officials had earlier said that any ceasefire deal with Hamas would result in a gradual lifting of the blockade.
