Israel on Sunday pulled all its troops out of southern Gaza, including from the city of Khan Yunis, the military and Israeli media said, after months of fierce fighting with Hamas militants left the area devastated.

But the military, known as the IDF, said a "significant force" will continue to operate in the rest of the besieged Gaza Strip.

"The 98th commando division has concluded its mission in Khan Yunis," the army said in a statement to AFP. "The division left the Gaza Strip to recuperate and prepare for future operations.

"A significant force led by the 162nd division and the Nahal brigade continues to operate in the Gaza Strip and will preserve the IDF's freedom of action and its ability to conduct precise intelligence-based operations," the statement said.

The Israeli newspaper Haaretz said the withdrawal was tactical.

An army official told the left-leaning daily that "there's no need for us to remain in the sector without an operational need".

"The 98th division dismantled Hamas's Khan Yunis brigades and killed thousands of its members. We did everything we could there."

Displaced Palestinians from Khan Yunis may now be able to return to their homes after sheltering in the far southern city of Rafah, Haaretz reported the official as saying.

However, the army "will continue to operate there according to the operational needs," the official told Haaretz.

Once densely populated, Khan Yunis has been the scene of fierce fighting for months, with relentless bombardment reducing swathes of the city to rubble.

Despite an international outcry, the Israeli government has vowed to carry out a ground offensive in and around neighboring Rafah city where more than 1.5 million Gazans have sought refuge.

The war in Gaza was sparked by the Hamas attack on October 7 that resulted in the deaths of 1,170 Israelis and foreigners, most of them civilians, according to an AFP tally based on official Israeli figures.

At least 33,175 people have been killed in the Palestinian territory in Israel's campaign of retaliation, according to Gaza's Hamas-run health ministry.