The move on Monday came after an intense Israeli assault on the territory killed eight more Palestinians overnight, adding to the more than 100 people killed in past six days.
The Israeli army spokesman said: "Almost all our forces have already returned to Israel."
Hamas has welcomed the Israeli withdrawal and said it signalled a 'victory' for the Palestinians.
Mahmoud Abbas, the Palestinian president, had suspended all contact with Israel over its assault on Gaza.
Overnight, Israel attacked Gaza from both land and sea with naval ships shelling the territory.
The EU, UN and the Catholic pope joined Abbas on Sunday in demanding an immediate halt to the violence.
Israel says the raids are in self-defence, aimed at curbing homemade rockets being fired over the border from the Hamas-controlled territory.
It has threatened to intensify its ground and air campaign, despite allegations it is using excessive force.
Nine rockets slammed into southern Israel, wounding four people on Sunday, Israeli ambulance workers said.
Two people were killed by Israeli artillery shelling at the Jabaliya refugee camp, raising the number of Palestinians killed on Sunday to 10.
At least a third of the Palestinians killed over the past six days have been children, according to medical sources.
Last Mod: 03 Mart 2008, 10:12