Grapel, a US-Israeli dual citizen held on spying suspicions, will be exchanged for 25 Egyptians jailed in Israel [Reuters]

Twenty-five Egyptians have left a jail in southern Israel in an exchange that will see Egyptian authorities free a US-Israeli man they have been holding since June 12.

The Associated Press reported the prisoners were being driven by bus to the border with Egypt on Thursday ahead of the release of Ilan Grapel, who was jailed in Cairo, the Egyptian capital, on suspicion of espionage.

The exchange, reportedly mediated by the US, came after a successful Egyptian-negotiated swap between Israel and the Palestinian group Hamas that freed Gilad Shalit, a captive Israeli soldier, in exchange for more than 1,000 Palestinian prisoners, although only less than half of those have so far been .

The Egyptian prisoners had all been convicted of smuggling drugs or weapons or infiltrating Israel illegally.

Grapel, 27, was volunteering at a legal aid group in Cairo when he was arrested and accused of spying for Israel during the uprising that overthrew Hosni Mubarak, Egypt's former president, in February. Israel denied the espionage allegations, as did Grapel's family and friends.

Grapel's arrest led to fears in Israel that relations with the Egypt, the first Arab country to sign a peace deal with Israel in 1979, would sour following the fall of Mubarak.

Grapel made no secret of his Israeli background and entered Egypt under his real name. His Facebook page had photos of him in an Israeli military uniform.

Wounded in fighting

Under the swap deal, Grapel is to board a plane in Cairo later on Thursday and fly to Israel. His sister, Michal, told Israel's Army Radio that their mother, who lives in Queens, New York, had flown to the region to meet her son.

She would fly back with him to the US where he is studying law, at an unspecified date, the sister said.

Grapel moved to Israel, where his grandparents live, as a young man. He did his compulsory military service in Israel during its 2006 war in Lebanon and was wounded in the fighting. He later returned to the US to study.

At the time of his arrest he was doing a legal internship with a local nonprofit organisation in Cairo and planned afterwards to return to the US for his final year of law school.

Some Israelis have criticised their government for making a deal to free a citizen arrested in a friendly nation on what they think were trumped-up charges.

Since Mubarak was toppled, Egypt's military rulers have often warned against what they call "foreign" attempts to destabilise the country.