The truce which began just after midnight (0231 IST) was the fruit of days of Egyptian-brokered mediation to stem more than four weeks of violence which has killed 1,939 Palestinians and 67 on the Israeli side since July 8.
Ten hours into the truce, the skies over Gaza remained calm, with no reports of violations on any side and signs of life emerging on the streets of the war torn coastal enclave which is home to 1.8 million Palestinians.
As the sun rose on Gaza City, shops and businesses began opening their doors and a handful of people could be seen doing their early shopping.
Outside a UN-run school, a clutch of cars and donkey carts waited to take some of the refugees back to homes they had fled during the fighting.
"We want to go back to see what happened to our house," said Hikmat Atta, 58, who had piled his family into a small cart and was heading back to his home in the northern town of Beit Lahiya, which they had left in the first days of the war.
But with the truce still in its early stages, he was not taking any chances.
"We're just going back for the day, at night we'll come back here," he said.
Egypt urged the warring sides to use the three-day lull to reach "a comprehensive and permanent ceasefire," after efforts to extend a similar truce last week collapsed into a firestorm of violence.
UN Secretary-General Ban Ki-moon said it would give the two sides "another chance to agree on a durable ceasefire" while stressing the importance of addressing "the underlying grievances on both sides."
Hamas, the de facto power in Gaza, has conditioned its agreement for any permanent agreement on Israeli lifting its eight-year blockade on Gaza.
"We insist on this goal," Hamas's exiled leader Khaled Meshaal said in an exclusive interview in Doha on Sunday.
"In the case of Israeli procrastination or continued aggression, Hamas is ready with other Palestinian factions to resist on the ground and politically,” he added.
Veteran Palestinian negotiator Saeb Erakat arrived in Cairo late on Sunday for talks with Egyptian and Arab League officials on behalf of president Mahmud Abbas, an airport official said.
Meanwhile, an Israeli team arrived in Cairo on Monday, an Israeli official said.

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