Ehud Olmert, Israel's prime minister, has pledged to free more than 120 Palestinian prisoners, a move seen as a goodwill gesture aimed at bolstering Mahmoud Abbas, the Palestinian leader.
The agreement came in a meeting between the two leaders in Jerusalem on Wednesday, the first since Olmert said he would resign over a corruption investigation.
Saeb Erekat, the Palestinian negotiator, said Abbas wanted the prisoner release -scheduled for August 25 - to include long-serving inmates, women and children as well as political leaders.
Erekat said Israel had agreed to release between 120 to 150 people and possibly more.
Mark Regev, Olmert's spokesman, said: "In response to a request by Abu Mazen [Abbas] ... the Israeli side will be releasing Palestinian prisoners towards the end of August as a sign of good faith and a confidence-building measure towards the Palestinians."
Asked if those Marwan Barghouthi, who is seen as a possible successor as Palestinian president as leader of the Fatah party, would be among those freed, Regev said: "I'm not talking about names."
Some Israeli officials see the possible release of Barghouthi to Abbas as preferable to freeing him to Hamas as part of a deal over Gilad Shalit, the captured Israeli soldier, that Egypt is trying to help broker.
Israel released 429 Palestinians as a gesture to Abbas after the resumption of peace negotiations last November at a US-backed conferencein Annapolis, Maryland.
Palestinians have been seeking assurances that peace talks, kick-started at the conference will continue despite Israel's internal political turmoil.
The talks have been hampered by continuing violence, mainly in Gaza but also in the West Bank, and by continuing expansion of Jewish settlements in and around Jerusalem.