The military on Tuesday said 52-year-old Qaid Farhan Alkadi, a member of the Bedouin community in southern Israel who worked as a security guard on a kibbutz near the Gaza border, had been transferred to hospital and his condition was stable.

Military spokesman Rear Admiral Daniel Hagari said Alkadi had been rescued in an underground tunnel but gave no details of the operation, citing the security of the remaining hostages in the Gaza Strip and Israeli forces.

A military official told Reuters soldiers were operating in the area where Alkadi was found, navigating a complex underground system where hostages were suspected to be held alongside militants and explosives.

"Farhan was found by the troops when he was alone, and was rescued from the tunnel," the official said.

"As part of the preparations for the operation, lessons were learned from previous events and encounters with hostages."

Israeli media quoted Alkadi as saying he had not seen the sun for almost eight months, and that another hostage who was with him for two months had "died next to me".

The operation was hailed by Israeli leaders, desperate for good news almost a year into a grinding military campaign against Hamas during which pressure has mounted on the government to do more to bring over 100 hostages back home.