Israel had already pulled out most of the 10,000 troops who entered Lebanon during 34 days of fighting triggered by Hezbollah's abduction of two soldiers in a cross-border raid on July 12.
A ceasefire took hold on August 14 to end a war between US-backed Israel and Iranian-supported Hezbollah that sent shock waves through the Middle East.
Around 1,200 Lebanese, mostly civilians, and 157 Israelis, mostly soldiers, were killed in the fighting - the worst since Israel's 1982 invasion.
Israeli forces had withdrawn from Lebanon in 2000 after 22 years of occupation.
Israeli media said only a few hundred troops with some armoured vehicles remained on Saturday.
Lebanese officials said the commander of UN peacekeepers in Lebanon, Major General Alain Pellegrini, had informed Prime Minister Fouad Siniora that Israel planned to complete its withdrawal by Sunday evening.
Israeli officials had said they hoped to pull out all troops by last weekend, but this was delayed while discussions with the UN Interim Force in Lebanon (UNIFIL) on rules of engagement continued.
Israel is worried that the peacekeepers and Lebanese army would not end the presence of Hezbollah near its border.
UN Resolution 1701, which ended the war, authorises up to 15,000 UNIFIL troops to join a similar number of Lebanese army troops in deploying in the south as the Israelis leave.
The resolution calls for a demilitarised zone south of the Litani River patrolled by the Lebanese army backed by UNIFIL.
Hezbollah has rejected international calls for it to disarm.
Israeli television reported that despite the ground pullout, Israel said it would retain the right to overfly Lebanese territory and patrol Lebanon's coast, arguing that the U.N. resolutions were not being fully observed by Hizbollah.