A delegation from Hamas, the Islamist group that controls the Gaza Strip, crossed into Egypt for a meeting with Egyptian security officials in Cairo to discuss the deal that Egypt and Germany have been mediating.
Officials close to the talks said Israel agreed to include in the exchange for soldier Gilad Shalit some 160 prisoners whose release it previously vetoed. But both sides have publicly avoided comment or sought to play down talk of an imminent deal.
Shalit was captured by Hamas-led gunmen who tunneled into Israel from Gaza in 2006. Israel has linked any major easing of its blockade on the territory to the soldier's return home.
Sources on both sides told Reuters there were hopes that a deal might be struck by the end of the week, when the Muslim festival of Eid al-Adha begins. But one Hamas official, Sami Abu Zuhri, sought to play down speculation that a deal was done.
n Jerusalem, Israeli officials declined to discuss in detail prospects for a deal with Hamas, a group that has rejected Western demands to recognize Israel, renounce violence and accept existing interim Israeli-Palestinian peace accords.
On October 2, Israel freed 20 Palestinian women in return for a "proof-of-life" video showing the 23-year-old Shalit.