Three Israeli hostages were killed after troops mistook them for a threat, an IDF spokesman has confirmed.
Rear Admiral Daniel Hagari confirmed the trio were fatally shot after soldiers opened fire.
He said: "This is a tragic incident, the IDF bears responsibility."
Hagari added: "This is an area where the soldiers encountered many terrorists, including suicide bombers."
Two hostages, 28-year-old Yotam Haim and 22-year-old Samer Talalka, were identified and named following the incident.
The identity of the third fatality is not being named after requests were made by their family.
Hagari also revealed: "After the shooting, immediate suspicion arose regarding the identity of the suspects, and their bodies were identified.
"This is a tragic event that occurred in a combat zone with many terrorists.
"We are in the stage of gathering the facts and clarifying the details of the event."
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Israeli Prime Minister Benjamin Netanyahu speaks during a press conferenceREUTERSAn IDF spokesperson added: "During combat in Shejaiya, the IDF mistakenly identified three Israeli hostages as a threat.
"As a result, the troops fired toward them and they were killed.
"During searches and checks in the area in which the incident occurred, a suspicion arose over the identities of the deceased.
"Their bodies were transferred to Israeli territory for examination, after which it was confirmed that they were three Israeli hostages."
Hamas captured around 240 Israeli hostages during its horrific October 7 attack which resulted in around 1,200 deaths.
IDF Spokesperson Rear Admiral Daniel Hagari IDFA week-long truce saw 110 hostages return to Israel.
However, the conflict continued at the start of December after Hamas was accused of breaching its ceasefire obligations.
Nearly 19,000 people in Gaza have died after Israeli Prime Minister Benjamin Netanyahu vowed to crush the terrorist organisation, the Strip's Hamas-run Health Ministry has claimed.
However, the IDF's statement comes after Israel announced it will open the Kerem Shalom crossing to allow humanitarian aid into Gaza.
The bodies of two soldiers taken hostage by Hamas were also discovered earlier today.
Armoured vehicles of the Israel Defense Forces (IDF) are seen during their ground operations at a location given as GazaREUTERSCorporal Nik Beizer and Sergeat Ron Sherman were found dead during an operation in Gaza and have been brought back to Israel.
The IDF said: "After an identification process carried out by medical officials and military rabbis, today (Friday) IDF representatives informed the families of CPL Nik Beizer and SGT Ron Sherman, who were taken hostage by the Hamas terrorist organization on October 7, that their bodies had been recovered and returned to Israel."
Corporal Beizer was 19 years old from Be'er Sheva and was taken hostage while serving as a driver for the Israeli military.
Sergeant Sherman, also 19, from Lehavim, was abducted during his service as an NCO.