Yahya Sinwar, 55, will replace Ismail Haniyeh, who is running for the leadership of Hamas' political bureau to succeed Khaled Mashaal, the Times of Israel reported. Haniyeh has been the leader in Gaza since its takeover in 2007.
Another hard-liner, Khalil al-Haya, was elected as Sinwar's deputy.
Sinwar spent 22 years in Israeli after being sentenced to life in 1989 for murdering Palestinian collaborators with Israel. He was released in a 2011 prisoner exchange for Israeli soldier Gilad Shalit.
In September 2015, the United States added Sinwar to its terrorism blacklist.
"He is considered to be one of the most senior and prominent prisoners to be exchanged, and has called on militants to capture more Israeli soldiers," the U.S. State Department wrote in 2015.
Sinwar was born in the Khan Younis refugee camp in southern Gaza and founded Majd, one of Hamas' intelligence services.
He founded Hamas' military wing, Izzedine al-Qassam Brigades, in the 1980s.
Gaza is one of four Hamas constituencies. The others are West Bank, exiled Palestinian communities in the Mideast and members imprisoned by Israel. Each group picks local leaders and delegates to the group's Shura Council. Mashaal has announced he will step down as overall leader.
Hamas, which calls for Israel's destruction, has been designated a terrorist group by Israel, the United States, European Union and other world powers. The United States made the declaration in 1997.
Israel and Egypt maintain a blockade around Gaza in an attempt at prevent attacks by militants there.