Saeb Erikat, a senior Palestinian negotiator, said the list of detainees includes Marwan al-Barghuthi, a prominent West Bank leader, and Samir Kantar, a Lebanese resistance fighter imprisoned for killing three Israelis.
"We have submitted lists of 20 prisoners who have spent more than 20 years in Israeli jails," Erikat said on Tuesday, The Associated Press reported.
Al-Barghuthi was snatched by Israeli soldiers in April 2002 and sentenced to five life terms after being convicted in an Israeli court in connection with deadly Palestinian attacks.
Kantar has been in prison for nearly 27 years and is serving jail terms totalling 542 years for killing three Israelis during an attack in 1979.
Palestinian Minister of Prisoner Affairs Sufian Abu Zaydeh said progress in negotiations will not necessarily require the release of al-Barghuthi and Kantar.
A joint Israeli-Palestinian committee will meet in the coming weeks to discuss the list and formulate criteria for further prisoner releases.
"On the issue of prisoners, I am very happy, very happy. This is the first time Israel is considering changing its position regarding the release of prisoners," Abu Zaydeh told Israel Radio.
Marwan al-Barghuthi was taken
prisoner by Israel in 2002
"My feeling is that there is more Israeli understanding than in the past regarding the prisoners. I hope I am not mistaken," he said.
Israel holds more than 7000 Palestinian prisoners, and the Palestinians have long demanded their release.
The prisoner issue was one of the main reasons a summit planned for Tuesday between Israeli Prime Minister Ariel Sharon and Palestinian President Mahmoud Abbas was delayed.
The Palestinians had been pushing the Israelis to make confidence-building gestures such as releasing more prisoners, in line with the road map peace plan.
But Israel has been unimpressed by Abbas's reluctance to institute a crackdown on groups such as Hamas since the departure of its troops from the Gaza Strip a month ago.
West Bank arrests
Israel is undertaking mass arrests in the West Bank, focusing on Hamas members.
Deputy Prime Minister Shimon Peres on Tuesday said it was in the common interests of Israel and the Palestinian Authority (PA) to prevent Hamas from strengthening its base in the West Bank, the news agency AFP reported.
Peres voiced concern of Hamas
shifting base to the West Bank
Israel should be unwavering in its support of Abbas, he said.
"It is crystal clear that we must show no compromise in our fight against Hamas and support Abu Mazen without hesitation," the Labour leader told public radio. Abu Mazen is another name for Abbas.
"This is a battle between fanatical groups of extremists and murderers, such as Hamas and al-Qaida, and men of reason, people with whom one can talk and negotiate," Peres said.
"It is as much an internal battle within the whole Arab world as a conflict with Israel."
Israel has threatened to disrupt next January's Palestinian legislative elections if Hamas participates as planned and has used this to justify the recent arrests.
"We deeply dread the idea that the terrorism will move from Gaza to the West Bank which is why we are carrying out preventive operations," Peres said in reference to an ongoing arrest campaign in the occupied West Bank.
Hamas refuses to give up arms
or stop fighting the occupation
The Israeli army said on Tuesday that Hamas members were among another 20 activists arrested overnight in West Bank cities such as Jenin and Nablus.
Among the Palestinians arrested was a 22-year-old woman Israel says is an explosives engineer. The woman was said to be originally from Gaza but had recently moved to the West Bank to pass on bomb-making skills.
Muhammad Nazal, a Hamas political bureau spokesperson in Lebanon, said: "Since they [Israel] pulled out of Gaza, they want to take the battle to Hamas in the West Bank."
He also said that Israel wanted to frustrate Hamas's political ambitions in the upcoming elections.
Meanwhile, the Rafah border crossing between the Gaza Strip and Egypt was temporarily reopened on Tuesday to enable hundreds of Palestinian pilgrims to reach Saudi Arabia, Palestinian security sources said.
The terminal would remain open for 48 hours, Salim Abu Saffiyeh, the official with responsibility for security at the border, said.
Besides the Muslim faithful travelling to Saudi Arabia, via Egypt, for Umra (the lesser pilgrimage), the Rafah crossing was also open to university students studying abroad, those needing medical treatment and Palestinians who are originally from Gaza but live abroad.