The decision was made in a meeting with top Israeli security officials, and still requires cabinet approval, security officials said on Thursday.
Israel initially planned to destroy the homes and greenhouses of 8500 settlers in 21 communities in Gaza as part of the withdrawal.
Israel wanted to avoid scenes of jubilant Palestinians taking over the settlers' homes.
But the government was also concerned that destroying the houses would generate international criticism, cause environmental damage and force the pullout to take far
longer - and cost much more - than planned.
In 1982, Israel was accused of acting in bad faith for razing the settlement of Yamit when it withdrew from the Sinai Peninsula.
Mofaz on Thursday reversed the initial plan to destroy the Gaza buildings, saying it would cause criticism and force troops to remain in Gaza longer than planned, participants at the meeting said.
Mofaz hopes to shorten the
timetable for withdrawal
Mofaz hopes to make the timetable of the withdrawal as short as possible.
Under Mofaz's plan, synagogues and ritual baths from Gaza would be dismantled and moved to Israel.
The mezuzahs, or religious objects attached to the door frames of houses, would also be removed. The army bases will all be destroyed.
The buildings will be handed over once the evacuation has been completed.
Mofaz's decision was confirmed by a senior government official. Israeli media also reported the decision.
Palestinians have not yet developed a plan for what to do with the evacuated areas of Gaza.
Some wanted the houses to remain, while others argued it would be better to destroy them so they could be replaced with higher-density housing projects.
"They have finished the negotiations with themselves, and now they are trying to tell
us what to do"
Some officials feared the houses would be doled out as perks to Palestinian officials.
Palestinian negotiator Saib Uraiqat on Thursday said the decision over the buildings should have been negotiated with the Palestinians and not made unilaterally by the Israeli government.
"They have finished the negotiations with themselves, and now they are trying to tell us what to do," Uraiqat said.
"We cannot afford to have settlers' homes in Gaza, each 500sq metres big, in the densely populated Gaza Strip. Gaza is the most densely populated area on Earth. We don't need houses that are each 500 sq. metres big."