The body was handed over to Lebanese officials through the Rosh Hanikirah border crossing, following a series of secret meetings with the mediation of a third party.
The terrorist was killed on June 29 after a group of terrorists attempted to carry out an attack along the northern border.
Senior IDF officers said they estimate terrorists aimed to prepare groundwork for an abduction of an IDF soldier.
During the incident, soldiers spotted a group of Hizbullah gunmen infiltrating a few hundred meters into Israeli territory and fired at them.
The terrorists then fired 20 mortar shells at the forces, killing Corporal Uzi Peretz and wounding four troops.
The incident ended more than 72 hours later after special forces searched for the perpetrators.
Possible future deal?
Following the attack, the Lebanese government requested Israel return the body. An IDF officer involved in the affair told Ynet that from the very beginning it was obvious the terrorist was the son of a senior Hizbullah member, from a well-known Lebanese family.
The body had been held at the Abu-Kabir Forensics Institute and was not buried in a cemetery for enemies killed in Israeli territory.
It is estimated that the return of the terrorist's body to Lebanon is not accidental and that Israel's agreement to return the body is part of a future deal - a move that may give Israel some extra points in future negotiations with Hizbullah.
In addition, a former Lebanese prisoner who stayed in Israel illegally will also be returned. The prisoner served a 14-year sentence after he was convicted of rape, possession of drugs and extortion in Israel.