The celebration began at 1 p.m., drawing large numbers of residents while motorcyclists sporting green Hamas flags drove through the city's main street, the Israeli newspaper Haaretz reported.
The newspaper said Hamas Prime Minister Ismail Haniyeh and top official Mahmoud al-Zahar made appearances and addressed the crowd while the Iz al-Din al-Qassam, the military wing of the Hamas movement, staged a parade.
Its leaders had promised a "surprise" for the rally, although there was no indication of what that might be, sources said.
School was canceled in Gaza for the event, which Haaretz said was meant to show that the militant group still enjoyed widespread support after its defeat by the Israeli military in Operation Cast Lead nearly a year ago.
The celebration came a day after Hamas politburo chief Khaled Meshal, who is based in Syria, met in Tehran with Iranian president Mahmoud Ahmadinejad, who reportedly offered his support, saying, "The Iranian government and the Iranian people will always stand by the Palestinians and the Palestinian resistance."