Only dozens of Palestinians and no goods will be able to cross in both directions each day.
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The crossing has largely been closed since May 2024, when the Gazan side was captured by Israeli forces.
The reopening was supposed to happen during the first phase of US President Donald Trump's ceasefire plan between Israel and Hamas, which began in October. But Israel blocked it until the return of the body of the last Israeli hostage in Gaza, which happened last week.
It will come as a relief to many Palestinians who see it as a lifeline to the world, although there is frustration that only small numbers of people and no goods will be allowed through.
Around 20,000 sick and wounded Palestinians are waiting to leave Gaza for treatment.
Israeli reports say only 50 patients - accompanied by two relatives - will be allowed to exit each day, and that 50 people who left Gaza during the war will be allowed to return.
The crossing will be run by supervisors from the EU and local Palestinian staff, while Israel will carry out remote security checks.
On Monday morning, an Israeli security official said the Rafah crossing had "now opened to the movement of residents, for both entry and exit" following the arrival of teams from the European Union Border Assistance Mission.
Al Qahera News TV, which is close to Egyptian intelligence, said the crossing had "received the first batch of Palestinians returning from Egypt to the Gaza Strip". The move came "as part of Egyptian efforts to facilitate movement through the crossing", it added.
Mohammed Nassir, a Palestinian who had his leg amputated after being injured early in the war, said the crossing was a "lifeline".
"I need to undergo surgery that is unavailable in Gaza but can be performed abroad," he told AFP news agency.
On Sunday, Israeli authorities said a trial opening of the crossing had been carried out.
One Palestinian official familiar with the arrangements for the trial told the BBC that around 30 Palestinian staff members had arrived at the Egypti
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