Polisario Secretary-General Muhammad Abd al-Aziz told a press conference held late on Thursday with Saif al-Islam, son of Libyan leader Muammar Qadhafi, that the release was decided upon to mark the holy Muslim fasting month of Ramadan "at the request of Colonel Qadhafi in line with UN recommendations".
Seif al-Islam said his Qadhafi foundation had been involved in the operation for four months.
The release of the prisoners was to start on Friday with the International Committee of the Red Cross (ICRC) repatriating them to Morocco by air.
Polisario would still hold some 600 prisoners after the release, according to Abd al-Aziz who said that his organisation had already freed more than 1300 Moroccan prisoners since the start of the conflict in Western Sahara.
Abd al-Aziz also said that Morocco was holding 150 Saharan prisoners of war while some 500 others were listed as missing or had been kidnapped.
Abd al-Aziz and Qadhafi's son had met Algerian President Abd al-Aziz Bouteflika on Thursday.
Qadhafi played a key role in the
King Muhammad VI of Morocco received a telephone call late on Thursday from Colonel Qadhafi telling him that "several" Moroccan prisoners of war held by Polisario at Tindouf in southwest Algeria were to be freed soon.
In August, 243 Moroccan prisoners were released by Polisario and handed over to the ICRC. Captured between 1975 and 1980 they were freed at the request of Spanish Prime Minister Jose Maria Aznar.
The UN Security Council in October extended the 12-year peacekeeping mission in Western Sahara for another three months, with no end to the standoff between Algeria and Morocco over the former Spanish colony in sight.
Morocco has rejected a plan backed by UN Secretary General Kofi Annan that would lead to a referendum on self-rule for the disputed territory, where the Algerian-backed Polisario Front wants independence.
Morocco annexed the mostly-desert coastal region in 1975 and a long war with the Polisario ensued.
UN peacekeepers arrived in 1991 but with their mission having already cost more than $500 million, some countries want to pull out the troops.
Under the latest plan, crafted by UN envoy and former US secretary of state James Baker, Western Sahara would have autonomy during a five-year transition period followed by a referendum on sovereignty.