The handover marks the first return of dead bodies during the current agreement and Israel is not expected to confirm their identities until full DNA checks have been completed.
Red Cross vehicles drove away from the handover site in the Gaza Strip with four black coffins that had been placed on a stage. Each of the caskets had a small picture of the hostages, Reuters reported.
Armed Hamas militants in black and camouflage uniforms surrounded the area.
After the hostages were handed over by the Red Cross, the coffins were scanned for explosives, according to the military, before being transported to Israel.
Israelis lined the road in the rain near the Gaza border to pay their respects as the convoy carrying the coffins drove by.
"We stand here together, with a broken heart, the sky is also crying with us and we pray to see better days," said one woman, who gave her name only as Efrat.
In Tel Aviv, people gathered, some weeping, at what has come to be known as Hostages Square outside Israel s defence headquarters.
The two boys, their mother Shiri Bibas and a fourth hostage, Oded Lifschitz, were handed over under the Gaza ceasefire agreement reached last month with the backing of the United States and the mediation of Qatar and Egypt.
The Red Cross on Wednesday urged the handover be kept dignified. The Hamas-directed public hostage release ceremonies have come under growing criticism, including from the United Nations, which denounced the "parading of hostages".
SYMBOL
Kfir Bibas was nine months old when the Bibas family, including their father Yarden, was abducted at Kibbutz Nir Oz, one of a string of communities near Gaza that were overrun by Hamas-led attackers from Gaza.
Hamas said in November 2023 that the boys and their mother had been killed in an Israeli airstrike but their deaths were never confirmed by Israeli authorities.
"Shiri and the kids became a symbol," said Yiftach Cohen, a resident of Nir Oz, which lost around a quarter of its inhabitants, either killed or kidnapped, during the assault.
Yarden Bibas was returned in an exchange for prisoners this month.
Lifshitz was 83 when he was abducted from Nir Oz, the kibbutz he helped found. His wife, Yocheved, 85 at the time, was seized with him and released two weeks later, along with another woman.
Negotiations for a second phase, expected to cover the return of around 60 remaining hostages, less than half of whom are believed to be alive, and a full withdrawal of Israeli troops from the Gaza Strip to allow an end to the war, are expected to begin in the coming days.
