It demands that Hamas will have no role in governing Gaza, and leaves the door open for an eventual Palestinian state.
Speaking at a news conference following talks at the White House, Trump called the plan "a historic day for peace".
But he said that Netanyahu will have US backing to do what he has to do if Hamas does not agree to the plan.
Netanyahu then said Israel "will finish the job" if Hamas rejects the plan or does not follow through.
The proposal, if followed, would begin with the immediate cessation of military operations. It also says existing "battle lines" would be frozen in place until conditions are met for a staged withdrawal.
Under the plan, Hamas would lay down its arms and its tunnels and weapon production facilities would be destroyed.
The plan also says once the 20 living Israeli hostages and the remains of hostages who are believed to be dead are released, Israel would then release hundreds of detained Gazans.
For every Israeli hostage whose remains are released, Israel will release the remains of 15 deceased Gazans, the plan says.
It also adds that once both sides agree to the proposal "full aid will be immediately sent into the Gaza Strip".
The US also outlines its plan for the future governance of Gaza. It says a "technocratic, apolitical Palestinian committee" will govern temporarily "with oversight and supervision by a new international transitional body, called the Board of Peace, which will be headed" by Trump.
Former UK PM Tony Blair, and other leaders "to be announced", would also be part of the governing body. Blair called the plan "bold and intelligent".
The plan adds that Hamas must have no role in governance, "directly, indirectly, or in any form".
Much of the plan is focused on what the US calls an "economic development plan" to rebuild Gaza. It also says "Israel will not occupy or annex Gaza" and its forces will withdraw from the territory in stages over time.
In a shift from Trump's earlier statements, Palestinians will not be forced to leave Gaza and instead, the document said: "We will encourage people to stay and offer them the opportunity to build a better Gaza."
The plan also leaves the door open to an eventual Palestinian state.
A Palestinian source familiar with the ceasefire negotiations told the BBC "Qatari and Egyptian officials have handed over the White House plan to end the war in Gaza to Hamas officials in Doha".
Earlier a senior Hamas official told the BBC that the group remained open to studying any proposal that could end the war in Gaza, but stressed that any agreement must safeguard Palestinian interests, ensure a full Israeli withdrawal from Gaza and bring the war to an end.
Asked about the group's weapons, the official said: "The weapons of the resistance are a red line as long as the occupation continues."
"The issue of arms can only be discussed within the framework of a political solution that guarantees the establishment of an independent Palestinian state on the 1967 borders."