The move was approved by Israeli Prime Minister Binyamin Netanyahu and Defense Minister Moshe Ya'alon.
Maj. Gen. Eitan Dangot, coordinator of government activities in the Palestinian territories, informed senior Palestinian and Egyptian officials of the decision, the army said in a statement Tuesday.
Israel restricted the designated fishing zone in March in response to rocket attacks on southern Israel.
Israel has imposed a blockade on the Hamas-controlled Gaza Strip since Hamas took control of it in 2007.
The Oslo Accords between Israel and the Palestinians in 1993 stipulated that Israel would permit a 20-nautical-mile fishing zone off Gaza, the Ma'an News Agency said.