The number of Palestinian rocket attacks dropped sharply after the ceasefire went into effect overnight, and no major towns in southern Israel were targeted. The Israeli military said six projectiles had hit, causing no casualties, and that there had been no Israeli air strikes in the Gaza Strip.
Previous ceasefire deals after earlier rounds of fighting have often got off to a slow start, with guns gradually falling silent within a day or two.
A senior Egyptian security official in Cairo told Reuters by phone that both sides had agreed "to end the current operations", with Israel agreeing to "stop assassinations". and an overall deal "to begin a comprehensive and mutual (period of) calm".
The truce agreement followed appeals from world powers - the United States, the United Nations, France, the European Union and the Arab League - for both sides to exercise restraint.
Gaza's Hamas Islamist leadership has kept out of the fighting and seemed eager to avoid a larger conflict with Israel.
"We expect this ceasefire to continue but we cannot be sure so our forces...are ready to continue if it will end up being necessary," Israeli Defense Minister Ehud Barak, visiting southern Israel, told reporters.
"It was quite a successful round," he said, citing the deaths of 20 militants among the 25 Palestinians killed in Israeli attacks and what he termed the "impressively effective" Iron Dome rocket interception system.
The anti-missile batteries destroyed dozens of incoming rockets, but the barrages disrupted normal life for more than a million Israelis in the south, forcing schools to close and people to run for cover when sirens sounded.
"If Israel is committed to the agreement, we also will be committed to it," said Khaled al-Batsh, a senior leader of Islamic Jihad which, along with the Popular Resistance Committees, was most active in the fighting.
Amos Gilad, a senior Israeli defense official, said Israel would feel free to take "pre-emptive action" if Israeli lives were in danger. But, he told Army Radio, if "there is quiet on their part, there will be quiet on our part".