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Ada Sagi, 75, was taken from her home in Kibbutz Nir Oz on October 7 after the group crossed the border into Israel.
Her son Noam Sagi previously told a press conference that she had been due to celebrate her birthday with family in London days after she was taken hostage.
Mr Sagi, a psychotherapist, said his mother was freed on Tuesday evening after a pause in the fighting in Gaza was extended by two days.
“I can confirm that my mum, Ada Sagi, has been released tonight," he said in a statement.
“For our family, this is a moment we have dreamt of and worked for every minute of every day since October 7.
“It will be hard to believe it is true until we are able to embrace in person.
"Our first priority is my mum’s mental and physical health and we ask for time and space while we prioritise her well-being.
“Seeing my mum will be a moment of unparalleled relief and joy for us personally but comes against a backdrop of unparalleled grief and sorrow for our community.
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“For many families, including friends and neighbours, the tragedy is ongoing as long as their family members remain hostage, and the traumas they have suffered will leave scars that might never heal," Mr Sagi added.
“We call on every government, international agency and NGO to do whatever it takes to get every man, woman and child taken hostage on October 7 back where they belong – with their families.
“Enough with the games and enough with the psychological torture. Bring them home. Bring them all home, and do it now.”
Ada Sagi was among 10 Israeli and two foreign national hostages released by Hamas in exchange for 30 Palestinian women and children Israel had previously detained.