Ofer Kalderon, a French-Israeli dual citizen, and Yarden Bibas were handed over to Red Cross officials in the southern Gaza city of Khan Younis before being transferred to Israel.
Israeli-US citizen Keith Siegel was separately handed over at the Gaza City seaport.
Hours later, 183 Palestinian prisoners and detainees were released in the exchange.
The Rafah border crossing between Egypt and the Gaza Strip is open for the first time in months. (AP PHOTO)
Among them, 150 arrived in Gaza while 32 got off a bus in Ramallah in the occupied West Bank, where they were greeted by large crowds.
One freed prisoner will be exiled to Egypt, according to the Hamas prisoners' media office.
"I feel joy despite the journey of pain and hardship that we lived," said Ali Al-Barghouti, who was serving two life sentences in an Israeli jail.
"The life sentence was broken and the occupation will one day be broken," added Barghouti, as the crowd around him in Ramallah chanted "Allah Akbar (God is the most great)".
At the newly reopened Rafah crossing on the southern border, children suffering from cancer and heart conditions were among the first Palestinian patients to be allowed to leave the enclave for medical treatment in Egypt.
Mohammad Zaqout, a senior official in Gaza's health ministry, however, criticised the limited number of patients allowed to travel for treatment, saying that about 18,000 people needed better healthcare.
It was the first reopening of the Rafah border crossing in almost nine months.
In Israel, crowds gathered at the location in Tel Aviv known as Hostage Square to watch the release in the morning of the Israeli hostages on giant outdoor screens, mixing cheers and applause with tears as the three men appeared.
Israeli authorities havereleased 583 Palestinian prisoners and detainees so far. (AP PHOTO)
Kalderon, whose two children Erez and Sahar were released in the first hostage exchange in November 2023, and Bibas both briefly mounted a stage in Khan Younis, in front of a poster of Hamas figures including Mohammad Deif, the former military commander whose death was only confirmed by Hamas this week, before being handed over to the Red Cross officials.
"Ofer Kalderon is free! We share the immense relief and joy of his loved ones after 483 days of unimaginable hell," French President Emmanuel Macron said in a statement.
Saturday's handover featured none of the chaotic scenes that overshadowed an earlier transfer on Thursday, when Hamas guards struggled to shield hostages from a surging crowd in Gaza.
But it was once again an occasion for a show of force by uniformed Hamas fighters who paraded in the area where the handovers took place in a sign of their re-established dominance in the strip despite the heavy losses suffered in the war.
The total number of hostages freed so far is 18, including five Thai citizens who were part of an unscheduled release on Thursday.
After Saturday's exchange, Israel will have released 583 Palestinian prisoners and detainees, including militants serving life sentences for deadly attacks as well as some detained during the war but not charged.
As the fighting has abated, diplomatic efforts to build a wider settlement have stepped up.
Prime Minister Benjamin Netanyahu is expected to meet US President Donald Trump on Tuesday with the Gaza Strip ceasefire and a possible normalisation of relations with Saudi Arabia as part of a postwar deal likely to be a focus.
During the first phase of the ceasefire, 33 children, women and older male hostages as well as sick and injured, were due to be released, with more than 60 men of military age left for a second phase which must still be worked out.
Negotiations are due to start by Tuesday on agreements for the release of the remaining hostages and the withdrawal of Israeli troops from the Gaza Strip in a second phase of the deal, which is intended to lead to a final end of the war in the Palestinian enclave.
with DPA
