But Saeb Erekat, the Palestinian chief negotiator, has said talk of a deal is premature and Miri Eisin, the Israeli spokeswoman, declined to comment, saying: "We never give out information on this sensitive issue".
Erakat said: "According to my information, it's too early to talk about a deal at the moment."
Corporal Gilad Shalit, an Israeli soldier, was captured by Hamas fighters in a cross-border raid on June 25.
Several Israeli raids on Gaza failed to recover the soldier and Israel has refused to discuss other outstanding issues with the Palestinians with Shalit still in captivity.
"According to my information, it's too early to talk about a deal at the moment"
Ahmed Abul Gheit, the Egyptian foreign minister, has said a prisoner exchange would be discussed at a Red Sea summit between Hosni Mubarak, the Egyptian president, and Ehud Olmert, the Israeli prime minister, to be held later this week.
Egypt is expected to attempt to broker the release of Shalit in exchange for Palestinian prisoners, particularly women and children.
Abul Gheit was quoted by the London-based Al-Hayat newspaper as saying: "The deal to exchange Israeli soldier Gilad Shalit is on the agenda for the Mubarak-Olmert meeting on Thursday in Sharm el-Sheikh."
Israeli media said in the first stage of a prisoner exchange, Hamas would provide a video recording showing that Shalit is alive and Israel would then free a small number of prisoners.
Then, according to the reports, Israel would release 450 prisoners in exchange for the soldier, who would be handed over to Egyptian officials and transferred to Israel.
A sticking point in the negotiations is expected to be the reported insistence by Hamas on picking the prisoners to be freed, among about 8,000 held by Israel.
Some media reports said there would be a third phase in which Israel would release additional prisoners.
In the six months since Shalit's capture there have been numerous claims of progress and breakthroughs in contacts towarsd a prisoner exchange, but none have actually resulted in an exchange of prisoners.