A ceasefire deal between Israel and Hamas that will see hostages freed and a pause in 15 months of devastating hostilities has been reached, US President Joe Biden and Qatari Prime Minister Sheikh Mohammed bin Abdulrahman Al Thani said on Wednesday.

"Soon the hostages will return home," Biden said, confirming the deal involves a complete ceasefire, the return of hostages held by Hamas and the release of Palestinian prisoners held in Israel.

Al Thani, in a separate speech, announced the deal would take effect on 19 January. The leader said Qatar, the US and Egypt would be monitoring the implementation of the agreement to make sure it was enforced.

Biden confirmed speculation that the ceasefire involved three phases, with Palestinians returning home to their neighbourhoods and a boost of aid to the Gaza Strip in the first phase. To start with, 33 Israeli hostages in Gaza will be released and Israeli troops will withdraw from population areas in Gaza.

A second phase will involve further negotiations between Israel and Hamas for a permanent end to the war, once all remaining living hostages are returned and all Israeli forces are withdrawn from Gaza.

A third and final phase would see the full reconstruction of Gaza and the return of the remains of hostages to their families, Biden said.

If negotiations take longer than six weeks, the ceasefire will continue, the outgoing US President added.

A draft of the deal, reportedly first proposed by the US President in May of last year, indicated that the first steps involved Israeli forces withdrawing from the Wadi Gaza area and being deployed in a 700 metre perimeter. It also says that the first Israeli hostages to be released from Gaza would be nine of the most "ill and wounded" of the 33 hostages kept, in exchange for 110 Palestinians with life sentences.

Other details include further prisoner exchanges and condition to prep the Rafah border crossing to transfer the wounded and civilians.

Biden attributed reaching the deal to Israeli pressure on Hamas — which he said were weakened following the death of Yahya Al-Sinwar — the US response to Houthi attacks, the weakening of Hezbollah and the election of Lebanon's new president, Nawaf Salam.

"All told, these developments in the region," the leader said, "changed the equation."