The agreement between Hamas and Israel will come into effect on Sunday, and outlines the gradual withdrawal of Israeli forces from the besieged strip.
Israeli hostages held by the designated terrorist group will be exchanged for Palestinian prisoners.
"Australia welcomes the announcement of a ceasefire and hostage agreement in Gaza after 15 months of conflict and a devastating loss of civilian life," the prime minister said on Thursday in a joint statement with Foreign Minister Penny Wong.
Joint statement on the ceasefire and hostage deal in the Middle East. — Anthony Albanese (@AlboMP) pic.twitter.com/OmxDxJX35LJanuary 15, 2025
"Our thoughts are with all the civilians killed, displaced and taken hostage in this conflict, and the many humanitarian workers who lost their lives in the service of others.
"This agreement is a constructive step towards peace and stability in the region, it must mark the beginning of a new chapter for the Israeli and Palestinian people."
Australia would continue to work with the international community towards a two-state solution where Palestine and Israel could live peacefully side-by-side, Mr Albanese said.
"We hope it will allow the Palestinian people the opportunity to rebuild, reform their governance and pursue self-determination," he said.
"There must be no role for Hamas in the future governance of Gaza, any future Palestinian state must not be in a position to threaten Israel's security," he said, while again condemning Hamas.
"We will continue to act in partnership with the international community to support the urgent humanitarian needs of the people of Gaza."
United Nations secretary general Antonio Guterres welcomed the ceasefire, adding it needed to ensure unimpeded aid into Gaza to address the humanitarian crisis.
"It is imperative that this ceasefire removes the significant security and political obstacles to delivering aid across Gaza so that we can support a major increase in urgent lifesaving humanitarian support," he said.
"The humanitarian situation is at catastrophic levels."
Children in Gaza needed to be able to safely access assistance with 18,000 killed since the start of the war and thousands others suffering life-altering injuries, Save The Children said.
"The race is on to save children facing hunger and disease as the shadow of famine looms," Save The Children International CEO Inger Ashing said.
At least 46,000 people have been killed since the attack on Gaza in October 2023. (AP PHOTO)
The ceasefire provided "a glimmer of relief to Palestinian victims of Israel's genocide" but was overdue and wouldn't repair people's shattered lives, Amnesty International said.
"The nightmare will not be over even if the bombs cease," Amnesty's secretary-general Agnes Callamard said, pointing to 15 months of bombardment, people being displaced repeatedly and a lack of necessities like food and water.
"For Palestinians who have lost countless loved ones (and) in many cases had their entire families wiped out or seen their homes reduced to rubble, an end to the fighting does not begin to repair their shattered lives or heal their trauma."
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