The prime minister said that the exchange was "a matter of the highest moral order".

"Despite all hesitations, after weighing the pros and the cons, I support the agreement."

German mediation

Indirect negotiations between Israel and Hezbollah  have been handled by a UN-appointed German mediator.

Samir Qantar is the highest-profile Lebanese prisoner that would  be released, who is currently serving multiple life terms for an attack on an Israeli town in 1979.

In addition to Qantar, Israel is also supposed to release four other Lebanese prisoners and the bodies of around 10 Hezbollah fighters.

Hezbollah had demanded the release of hundreds of Palestinian prisoners, but Israel said it was only willing to release between five and 10, a senior Israeli government official said on Sunday.

In parallel to the Hezbollah talks, Olmert's government is trying, via Egypt, to recover Gilad Shalit, a soldier captured by Hamas in Gaza around the same period.

Olmert in 2006 ruled out any negotiations for the captured soldiers, launching a military offensive in Gaza and a 34-day war in Lebanon. More than 1,200 Lebanese, mostly civilians, died in the conflict, as well as 157 Israelis.