The reopening of the Rafah border crossing eases an Egyptian blockade of Gaza that has prevented the vast majority of the densely populated area's 1.5 million people from being able to travel abroad.
The closure, along with an Israeli blockade of its borders with Gaza, has fuelled an economic crisis in the territory.
But today's move also raises Israeli fears that militants will be able to move freely in and out of Gaza.
Highlighting those fears, the Israeli army said militants from inside Gaza fired a mortar shell into southern Israel overnight.
There were no injuries, and Israel did not respond. Israel and Egypt imposed the blockade after Hamas seized control of Gaza in June 2007. The closure, which also included tight Israeli restrictions at its cargo crossings with Gaza and a naval blockade, was meant to weaken Hamas, an Islamic militant group that opposes peace with Israel.
But since the ouster of Egyptian President Hosni Mubarak in February, Egypt's new leadership has vowed to ease the blockade and improve relations with the Palestinians.
The Rafah border terminal has functioned at limited capacity for months.
Travel has been restricted to certain classes of people, such as students, businessmen or medical patients.
And the crossing was often subject to closures. Travel through Israel's passenger crossing with Gaza is extremely rare.
Under the new system, most restrictions are being lifted, and a much larger number of Palestinians are expected to be able to cross each day, easing a backlog that can force people to wait for months.
Some 400 people had gathered at Rafah early today as the first bus load of passengers crossed the border.
Two Egyptian officers stood guard next to a large Egyptian flag atop the border gate as the vehicle passed through.
Among the first passengers to cross was Ward Labaa, a 27-year-old woman who was leaving Gaza for the first time in her life to seek medical care for a stomach ailment at a Cairo hospital.
More buses crossed Rafah later, dragging blue carts attached to the rear, with luggage piled high.
Salama Baraka, the chief Palestinian officer at the Gaza side of the Rafah terminal, said travel has been limited to about 300 passengers a day.
