Brian Ambrosio, of Wangaratta in Victoria who is the deputy principal of an American private school, was taken along with the school’s headmaster, Hendrik Taatgen, as they drove to work.
Mr Ambrosio has worked at the American International School in Gaza for three years, including one year as a physical education teacher.
Armed men stopped the blue Honda Civic the pair was travelling in about two kilometres from the school in the early morning hours.
Witnesses said the teachers were bundled out of their car into a waiting vehicle which then sped off.
As news of the incident broke, the school shut its doors and sent children home as they began to arrive at 7:30 am local time.
“We are really sad and we condemn this action and we ask for their immediate release,” school spokeswoman Heba Zayyan said.
“We have nothing to do with politics, we are an educational organisation,” Ms Zayyan added.
Mr Ambrosio’s wife, Ginette, who also works at the school teaching French and English, contacted his father in Wangaratta.
“She has rung a couple of times,” William John Ambrosio told reporters.
In Canberra, the Department of Foreign Affairs and Trade said an Australian consular official had been sent to the Gaza Strip as efforts were made to seek his release.
Co-ordinated drop off
The ordeal lasted a few hours, ending after a co-ordinated drop off was arranged with the mediation of Palestinian MP Kamel Sharafi.
A short while earlier a faxed statement said to be from the militant Wadia Hadad Brigades group had been sent out.
The organisation, linked to the radical Popular Front for the Liberation of Palestine (PFLP), claimed the double kidnapping was to protest against the detention of PFLP leader, Ahmed Saadat.
However, a spokesman for the PFLP said the group “has nothing to do with the statement and would not approve of such an act.”
Mr Ambrosio and Mr Taatgen were left unharmed at an undisclosed location near Gaza City before being driven by Mr Sharafi to the office of Palestinian leader Mahmoud Abbas.
Students of the American International School and their parents whistled, clapped and cheered as Mr Ambrosio and Mr Taatgen stepped from the car.
“I think they were aiming for Americans, so they were disappointed,” Mr Taatgen said, suggesting their abduction may have been a mistake.
Mr Ambrosio said that they had been well treated, but found that the day held “a bad memory.”
“We need somehow to get away from this bad memory, so we can contribute again to build the future of Gaza at this difficult time,” Mr Ambrosio said.
Security shaken
A spate of similar kidnappings in the Gaza Strip has shaken President Abbas’ grip on security.
More than 10 foreign journalists and aid workers have been taken hostage this year, although all were released unharmed.
The abductions are frequently carried out by militant groups with the intention of using captives as bargaining chips to get prisoners released from jail, to secure jobs from the Palestinian Authority, or to settle scores.
The escalating chaos has contributed to growing public unrest.
Around 2,000 Palestinians demonstrating outside the Gaza City branch of the Palestinian parliament on December 20 to demand and end to the lawlessness.
Mr Abbas’ failure to restore order is seen by some as opening the way for the Hamas militant group to gain ground ahead of parliamentary elections due on January 25.