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

But the military 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 Younis," the army said in a statement. "The division left the Gaza Strip in order 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.

Israeli security expert Omer Dostri said the withdrawal is purely tactical and did not mean the war was anywhere near over.

Under heavy pressure from its US allies, pulling out ground troops from southern Gaza would also help Israel in truce and hostage release talks with Hamas, Dostri said.

But he predicted that the commandoes will return to fight surviving Hamas militants after displaced people are evacuated from neighbouring Rafah, the far southern city on the Egyptian border.

"I predict that, after the evacuation of the residents, within two months there will be a (ground) move in Rafah to destroy the remaining Hamas brigades," the expert from the Jerusalem Institute for Strategy and Security said.

He estimated that one Hamas brigade remains in Rafah and a battalion and a half of its fighters in the centre of the Gaza Strip, "mainly in Nuseirat."

Dostri also predicted that, once those Gaza battles have ended, Israeli ground troops will step up operations against Iran-backed Hezbollah fighters in southern Lebanon. (AFP)