Miri Eisin, a spokeswoman in Prime Minister Ehud Olmert's office, said on Friday: "The naval blockade has been lifted.
"The UN naval force led by Italy has taken control of the sector in complete coordination with the Israeli military and will be implementing the embargo on arms intended for Hezbollah."
Israel's military confirmed its warships were returning home after being stationed off the coast of Lebanon for weeks to ensure that weapons intended for the Shia militant group are not smuggled ashore.
France, Italy and Greece have all said they will contribute ships to the force, whose task will be to monitor Lebanese coastal waters until the German navy formally takes over - probably in two or three weeks.
German forces are expected to lead the international naval patrols that will also involve British and Turkish ships and aircraft.
Israel has said that it is prepared to discuss the status of the disputed Shebaa Farms district, on the condition that the UN verify that the disputed land belongs to Lebanon and not Syria.
Another condition was that Beirut fulfill its obligations under UN Resolutions 1701 and 1559, including disarming Hezbollah.
"We would agree to discuss the issue," Olmert's office quoted him as telling Sergei Lavrov, the Russian foreign minister, who is in Israel along with his German and Italian counterparts ahead of a visit by Tony Blair, the British prime minister.
The Shebaa Farms is a small plot of land covering about 20 sq. kms (eight square miles) on the border of Israel, Lebanon and Syria.
It was captured by Israel as part of the Golan Heights, seized from Syria, during the 1967 war, but is now claimed by Lebanon with Syrian approval.
The resolution halted 34 days of combat between Israel and Hezbollah that killed more than 1,200 people in Lebanon and 160 Israelis, although the Jewish state has still to withdraw its last troops from Lebanese territory.