Israel's cabinet has approved the release of 500 Palestinian prisoners in what Prime Minister Ariel Sharon called a goodwill gesture to bolster new Palestinian leader Mahmoud Abbas and build mutual trust.
Government officials said the 500 prisoners could go free as early as Tuesday. Another 400 are due to be released in the next few weeks under a decision announced by Mr Sharon last week.
In a further step to support peace moves after Mr Sharon and Mr Abbas agreed on a ceasefire at a groundbreaking summit five days ago, Israel let more than 200 Palestinian labourers enter from the Gaza Strip for the first time in months.
Mr Abbas won a pledge from Islamic militants yesterday to keep a de facto truce while they weigh the ceasefire.
In a major policy shift, the Hamas and Islamic Jihad groups said they would not retaliate immediately for any Israeli military action.
"This is not an easy step, but this gesture possibly could help the Palestinian Authority solidify its rule and boost trust between the two sides," a government statement quoted Mr Sharon telling ministers.
The prisoners' names will first be published on a government website, giving the public an opportunity to appeal against the release of individual prisoners in a fast-track legal procedure.
Freedom for 8,000 Palestinians in Israeli jails is a highly emotive issue for Palestinians, who regard them as heroes of an uprising that began more than four years ago.
An Israeli government official said of the 500 slated for release, around half belonged to Mr Abbas's mainstream Fatah faction and the others were members of Islamic militant groups.
Israel, which has refused to free prisoners convicted of attacks that caused deaths or serious injuries, agreed last week to set up a joint committee with the Palestinians on expanding the list. But an Israeli government official said the jailed son of Marwan Barghouthi would not be released despite reports he would be freed at Mr Abbas's request. His father is a grassroots Fatah leader serving five life terms over the killing of Israelis.