"From here, our people begin the march towards establishing an independent Palestinian state with Jerusalem as its capital," said Abbas.
Thousands of Palestinians waved flags, danced and sang in the afternoon sunshine while fishing boats flew the national colours of black, white, red and green.
Many wore T-shirts with portraits of Abbas and his late predecessor Yasser Arafat.
Israel will begin removing residents from 21 Jewish settlements in the Gaza Strip and four of 120 in the West Bank on 17 August.
Palestinians welcome the pullout, though they fear the plan is a ruse to trade tiny Gaza for much of the West Bank and deny them the state they seek with Jerusalem as its capital.
Most Israelis back the plan for withdrawing from Gaza, where 8500 Jewish settlers live alongside 1.4 million fenced-in Palestinians.
Palestinians welcome the pullout
Israeli extremists say it gives up a Jewish birthright and rewards the Palestinian uprising.
Abbas has vowed to prevent attacks on the withdrawing Jewish settlers by Palestinian resistance groups following a six-month calm.
Palestinian cabinet minister Mohammad Dahlan said Abbas attended the celebration against the recommendation of security officials, who were worried about his personal safety.
The United States hopes the pullout plan will restart talks on a peace road map, but Israeli Prime Minister Ariel Sharon insists there will be no discussion of statehood until Palestinians dismantle all resistance groups - a condition of the peace plan.
Israel has also failed to implement its own road map promise to freeze settlement building and remove settler outposts set up without even Israeli authorisation.
The World Court has said settlements on land Israel captured in the 1967 Middle East war are illegal. Israel has disputed this.