The announcement comes a day after an apparent Israeli strike in the Iranian capital killed Hamas' top political leader.
The rapid events this week have left US, Egyptian and Qatari mediators scrambling to salvage talks for a ceasefire deal in Gaza.
At the same time, international diplomats were trying to avert an escalation into all-out regional war after the assassination in Tehran of Hamas' Ismail Haniyeh, Israel's killing of a top Hezbollah commander in a Beirut strike and now Israel's announcement of Deif's death.
There was no immediate comment on the Israeli claim by Hamas, which had previously said Deif survived the July strike in Gaza.
We can now confirm: Mohammed Deif was eliminated.— Israel Defense Forces (@IDF) August 1, 2024
A member of Hamas' political bureau, Izzat al-Risheq, said confirming or denying his death was the responsibility of the armed wing, known as the Izzedin al-Qassam Brigades, which was silent.
Israel believes Deif, the head of Hamas' military, and Yahya Sinwar, the top Hamas leader in Gaza, were the chief architects of the October 7 attack that killed some 1200 people in southern Israel and triggered the Israel-Hamas war.
Sinwar is believed to be hiding in Gaza.
Israel targeted Deif in a July 13 strike that hit a compound outside the southern Gaza city of Khan Younis.
More than 90 other people, including displaced civilians in nearby tents, were killed in the strike, Gaza health officials said.
The Israeli military said on Thursday that "following an intelligence assessment, it can be confirmed that Mohammed Deif was eliminated in the strike".
In its 10-month-old campaign in Gaza, Israel has killed some 39,480 Palestinians and wounded more than 91,100 others, according to Gaza's health ministry.
Muhammad Deif, the 'Osama Bin Laden of Gaza,' was eliminated on 13.07.24. This is a significant milestone in the process of dismantling Hamas as a military and governing authority in Gaza, and in the achievement of the goals of this war.— יואב גלנט - Yoav Gallant (@yoavgallant) The operation was conducted precisely and… pic.twitter.com/WCgL5fBkECAugust 1, 2024
Netanyahu has said he is determined to continue the war until Hamas is destroyed.
Far-right nationalist coalition partners have threatened to bolt the government if he halts the war.
Israeli Defence Minister Yoav Gallant said the strike was a "significant milestone" towards achieving the goals of the war.
"The results of this operation reflect that Hamas is an organization in disintegration," he wrote on X.
Deif was a founder of Hamas' military wing, the Qassam Brigades, in the 1990s.
He led the unit for decades through campaigns of suicide bombings against Israeli civilians, volleys of rocket fire into Israel and repeated Israeli assaults on Gaza since Hamas took power there in 2007.
He remained a mysterious figure in Gaza, never appeared in public, was hardly photographed and only rarely was his voice heard in audio statements.
Israel targeted Mohammed Deif in a July 13 strike that hit a compound outside Khan Younis. (AP PHOTO)
He survived a string of Israeli assassination attempts.
The killing of Haniyeh - a main negotiator in ceasefire talks - in particular threw into disarray months of efforts at reaching a deal for a ceasefire in Gaza and a hostage release.
Qatari and Egyptian officials had tense exchanges with US counterparts over the assassination, said an Egyptian official with direct knowledge of the talks.
US Secretary of State Antony Blinken said the US had no prior knowledge of the strike in Tehran that killed Haniyeh.
The Egyptian official said no deal was likely soon since Hamas must now name Haniyeh's replacement.
Instead, after Haniyeh's funeral, expected on Friday, the official said mediators would contact Hamas officials to explore the next steps.
After Haniyeh's assassination, Iran has vowed revenge against Israel, and the killing of Hezbollah commander Fouad Shukur in Beirut could also bring reprisals, raising fears of a wider escalation.
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