Sources familiar with the plan said that US president George Bush on Wednesday sent Senator Richard Lugar, the chairman of the Senate Foreign Relations Committee, to oversee the release.
Lugar, an Indiana Republican, left on a presidential jet for the region earlier on Wednesday and plans to meet Algerian President Abdelaziz Bouteflika before heading to the camps area, the sources said.
The release comes after former prisoners of war won support in Congress earlier this year while they were on a lobbying tour of the United States.
One source, who hoped the release could build momentum toward a settlement, said the Algerian government responded to US pressure following the former POWs' campaign and pressed the Polisario Front for the goodwill move.
Under the International Committee of the Red Cross' supervision, the prisoners are due to be released from camps in Tindouf in southwest Algeria, where the Polisario Front is based.
The exiles have invited a handful of journalists to fly to Tindouf for an event on Thursday whose nature they have not described.
The release could ease tensions between Morocco and Algeria in a region where the West wants stability because of fears it could be a possible source of Islamic militancy.
The Polisario Front, whose principal backer is Algeria, captured more than 2000 soldiers during a 16-year-long guerrilla war with Morocco over Western Sahara.
Despite staggered releases following a UN-brokered 1991 cease-fire, 404 POWs are still held in camps in southwest Algeria.
The conflict was triggered by Morocco's seizure of the northwest African desert territory of about 260,000 people shortly after colonial power Spain withdrew in 1975.