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A CNN team witnessed the transfer in the Zaporizhzhia region on Wednesday.
The American is 24-year-old Joshua Jones, who was killed in August.
The US State Department has informed Jones’ family about the body’s return, Jones’ father Jeff Jones told CNN on Wednesday.
The transfer took place just north of Vasylivka, in the Zaporizhzhia region, between Ukrainian and Russian-controlled Ukraine.
The two sides had agreed to a two-hour ceasefire in no-man’s land between Russian and Ukrainian-held Ukraine.
A Ukrainian ambulance was on site to transport Jones’ body.
The Ukrainians said that they were able to identify the body by Jones’ tattoos and other identifying characteristics.
The Russians had also sent photos of the body in advance.
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Ukraine released a Russian soldier on Wednesday as part of a larger swap, in which 10 Ukrainians were already freed.
In a tearful phone call Jeff Jones told CNN: “We got him back!”
“I cannot tell you what a burden is lifted off this family,” Jones. “I couldn’t give up that hope.”
Jones said he got a message from the International Legion on Wednesday morning at 6:30am via the Signal app.
At 7am he got a call from his son’s fiancée with the news.
A little later the US Embassy in Kyiv called him and verified the return.
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On Wednesday, US State Department spokesperson Ned Price expressed his condolences to Jones’ family in a statement, saying the “United States is appreciative of Ukraine for including recovery of this individual’s remains in its negotiations with Russia.”
He added that the remains “will soon be returned to the family.”
Jones’ remains were found in the so-called Donetsk People’s Republic (DPR), a Russian-backed, self-declared republic that has governed a breakaway portion of Ukraine’s Donetsk region since 2014.
DPR officials said in August that Jones’ body had been transferred to a mortuary in the region, and that they were ready to discuss a transfer of his remains.
Jones became one of a number of Americans who have been captured or killed in Ukraine since the outbreak of war in February.
Stephen Zabierslki was killed in May and Marine Corps veteran Willy Cancel was killed in April.
In July, the State Department said two American citizens were killed in Donbas.
Two American veterans, Andy Tai Ngoc Huynh and Alexander John-Robert Drueke, were captured in June while fighting for Ukraine in a battle near Kharkiv.
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The pair were released last month as part of a prisoner swap between Russia and Ukraine that was brokered by Saudi Arabia.
And CNN has previously reported that a third American, US Marine veteran Grady Kurpasi, went missing in action in June.
Russia is the only country that considers the DPR independent.
The international community does not recognise the region and its institutions, and considers the territory to be part of Ukraine.
Independent watchdog groups have long accused the separatists of a dismal human-rights track record and ill-treatment of prisoners.
