In an overnight operation "a fallen (Israel Defense Forces) soldier who was abducted on October 7th and held hostage in the Gaza Strip was rescued and returned to the State of Israel", an army statement said.
"At the request of his family, his name will not be published. We send our deepest condolences to the family and will continue to accompany them."
Prime Minister Benjamin Netanyahu said the soldier "fell in a heroic battle" and that "the heart of the entire nation grieves over the terrible loss".
Campaign group the Hostages and Missing Families Forum said the return of the soldier's remains offered "important closure" for the family, but demanded a negotiated deal to release those still held captive in Gaza since October 7.
"We must not be misled -- the remaining hostages don't have the luxury of waiting for rescue operations," the group said in a statement.
Hamas's October 7 attack resulted in the deaths of 1,199 people, mostly civilians, according to an AFP tally based on Israeli official figures.
The Palestinian militants also abducted 251 people, 103 of whom are still captive in Gaza including 33 the military says are dead.
On Tuesday the Israeli army announced that one hostage, a 52-year-old Israeli Bedouin man, had been rescued from a Gaza tunnel.
On Wednesday, as he left a medical centre, the rescued man, Kaid Farhan Alkadi, said international mediators needed to secure a ceasefire.
"Those in Qatar and Egypt need to put an end to this. They travel and return to the negotiations, this is a waste of fuel," he said.
"You have to sit together until white smoke comes out and be done with it."
Israel's retaliatory military campaign has killed at least 40,534 people in Gaza, according to the Hamas-run territory's health ministry. The UN rights office says most of the dead are women and children.
"My joy is not complete because I know that there are other hostages here and there, it doesn't matter if he is Arab or Jewish," Alkadi said.
"There is a family waiting for him and they want to be happy, so I hope and pray that there will be an end to this thing."
