Israeli Prime Minister Benjamin Netanyahu says he is taking a ceasefire deal with Hezbollah in Lebanon to his cabinet for agreement.
Mr Netanyahu said the ceasefire would last as long as Hezbollah allowed it to.
He promised to return to fighting if Hezbollah threatened Israel.
Before the announcement, it was reported the ceasefire would initially run for 60 days and involve a withdrawal of Israeli and Hezbollah forces from southern Lebanon.
In the hours leading up to the development, Israel launched heavy air strikes across Lebanon, including on the capital Beirut.
Hezbollah fired dozens of rockets in response, triggering Israel's air defence systems and warning sirens to sound across the north of the country.
In a televised address, Mr Netanyahu said a Lebanon truce would allow Israel to "focus on [the] Iranian threat" and its operations in Gaza.
He also warned Hezbollah that Israeli forces would respond to any acts of aggression by the terror group.
"In full coordination with the United States, we retain complete military freedom of action," he said.
"Should Hezbollah violate the agreement or attempt to rearm, we will strike decisively.
Conflict between Israel and the Iranian-backed group began the day after Hamas's October 7 attack on Israel last year, and escalated in September.
Hope ceasefire will help Gaza negotiations
Outgoing US President Joe Biden is expected to speak about the deal in the coming hours.
It is not yet clear when the ceasefire will come into effect nor what the terms of the agreement are.
In recent weeks, the US has been attempting to mediate a ceasefire between Israel and Hezbollah.
The US deal was reportedly based on the 2006 UN-brokered peace deal between Israel and Hamas, which required Hezbollah to withdraw 30 kilometres from the Lebanon border with Israel.
The deal would call for a 60-day pause in fighting and UN peacekeepers would be deployed in Lebanon's south.
It would also allow tens of thousands of residents living on both sides of the border to return to their homes.
The ceasefire, which was approved by Israel's security cabinet earlier on Thursday, will be voted on by the full cabinet in the coming hours.
Lebanese officials have previously indicated Hezbollah is in favour of the deal.
Earlier on Thursday, US Secretary of State Antony Blinken said any ceasefire between Israel and Hezbollah would also help end the conflict in Gaza.
There has been little sign of progress in the negotiations between Israel and Hamas, with mediator Qatar saying it will pull out until both sides "demonstrate a sincere willingness to return to the negotiating table".
