In exchange, Hamas-allied fighters would free seized Israeli soldier Gilad Shalit and hand him to the Egyptians.
At the same time, Israel would free women prisoners and minors in its custody.
"We've made reasonable progress concerning Palestinian dialogue, we've agreed on framework and dialogue continues"
Ismail Haniyeh, Palestinian leader
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Among those Hamas wants freed are Hamas prisoners serving long sentences and Marwan Barghouti, a leader of Abbas' Fatah party.
Kadoura Fares, a former Fatah legislator, said he had received personal assurances from Hamas's political chief, Khaled Meshaal, that Palestinian uprising leader Marwan Barghouti would be part of any swap.
Barghouti, a West Bank Fatah leader, is serving five life sentences for his involvement in attacks on Israelis. Israel, which has carried out prisoner swaps in the past, is concerned that an exchange will be seen as a victory for Hamas.
Abu Mujahed, a spokesman for the Hamas-affiliated Popular Resistance Committees, one of three resistance groups involved in Shalit's capture, said there was no agreement with Israel on the number of Palestinian prisoners to be freed or a timetable for any swap.
Haniyeh in Egypt
Ismail Haniyeh, the Palestinian leader, flew to Cairo on Tuesday for talks with the Egyptian officials who will mediate between Israel and Palestine.
Haniyeh met with with Suleiman and Ahmed Abul Gheit, Egypt's minister of foreign affairs.
Haniyeh said: "We've made reasonable progress concerning Palestinian dialogue, we've agreed on framework and dialogue continues."
Haniyeh's two day visit to Egypt constitutes the highest level meeting between Egyptian officials and members of the Palestinian Hamas government.