Israeli military spokesman Peter Lerner said the tunnel he accused Hamas of building extended several hundred metres (yards) into Israel though no exit had been constructed.
He declined to provide specifics on how it was “neutralised”.
“This tunnel is the first one to be found since Operation Protective Edge,” Lerner told journalists, referring to the 2014 war.
“It was built by Hamas in order to infiltrate and execute terror attacks against the people of the southern communities and (military) forces in that area.”
Hamas had not immediately commented.
According to Lerner, the tunnel was 30 to 40 metres underground and large enough for an adult to stand inside.
It included concrete slabs, “communication lines” and rails used to move rubble, he said.
The military believes the tunnel was built after the 2014 war.
Hamas forces have used tunnels in the past to avoid or carry out attacks, store weapons and at times to enter Israel and capture soldiers.
Israel launched its 2014 operation in Gaza, run by Islamist movement Hamas, with the stated objectives of halting rocket fire and destroying attack tunnels into Israel.
During the war, Israel discovered 32 tunnels, including 14 that extended into Israel, according to a UN report on the conflict.
It was the third war in Gaza since 2008 and the longest, deadliest and most destructive.
It killed 2,251 Palestinians, while more than 10,000 were wounded and 100,000 were left homeless.
On the Israeli side, 73 people were killed, of whom 67 were soldiers. Up to 1,600 were wounded, according to the United Nations.
A UN report in June said both Israel and Palestinian militants may have committed war crimes during the conflict, decrying “unprecedented” devastation and human suffering.
There have been a number of tunnel collapses within Gaza in recent months, including those extending toward Egypt. Several Gazans have been killed.
The tunnels toward Egypt are generally used for smuggling into and out of the Gaza Strip, which is under an Israeli blockade. Egypt’s border with Gaza has also remained largely closed.
In 2014, Egypt began setting up a buffer zone on its border with Gaza, and destroyed hundreds of tunnels it says were used for smuggling weapons and other items.
In September 2015, Egyptian forces carried out excavations that Palestinians say caused the flooding of the last remaining tunnels there.
Israel has been working on technology that could be used to better detect and destroy tunnels.
Flooding cannot be used because of the large amount of territory along the Israeli-Gaza border and because sea water that would be used would damage a reservoir in the area, an Israeli military official said.
Lieutenant Colonel Ohad Bachar, head of training for an Israeli military engineers unit involved in destroying such tunnels, told AFP last week that the flooding option was considered in the past, but abandoned due to those concerns.
He said that in general heavy equipment and explosives can be used in operations to destroy tunnels.