Israel handed over the remains of 15 militants killed in shooting or bomb attacks against Israelis within the past two years. The bodies were taken to Gaza for release to Palestinian authorities and waiting family members.
At the same time, the military prepared to release 500 Palestinian prisoners in the coming days. The Israeli Cabinet gave final approval for the releases on Sunday.
Cabinet Minister Zippi Livni told Israel radio who would be included.
She said those who were detained for lesser crimes, or who had served at least two-thirds of their jail time, would be up for release. Ms. Livni said no prisoners with blood on their hands would be released.
Israel holds about 8,000 Palestinian prisoners, and recently elected Palestinian President Mahmoud Abbas has said securing their release is a top priority.
Israel initially insisted that anyone involved in deadly attacks against Israelis would not be considered for release, but Prime Minister Ariel Sharon has now said he might consider making some exceptions.
Israeli Internal Security Minister Gideon Ezra explained. Speaking on Israel radio, the minister said releasing those with blood on their hands would be a high price that Israel might have to pay for peace and quiet. He said it is not an easy step, but might, in the end, be necessary.
Israel has agreed to release an additional 400 prisoners in the next three months. The Palestinians would like to see larger numbers released, and the two sides are to meet further to discuss the issue.
Israel is also preparing to withdraw from around Jericho, the first of five West Bank towns to be returned to Palestinian control.
Despite some isolated incidents, a general calm has prevailed since Palestinian militants agreed to a de-facto truce in talks with Mr. Abbas in Gaza. The Palestinian leader has said his administration would not tolerate any violations of the cease-fire he announced during a summit with Mr. Sharon last week.
In an interview with the New York Times newspaper, Mr. Abbas spoke of a new era, and said the war with Israel is effectively over.
Both sides say they are intent on seizing this opportunity to end more than four years of violence. The prisoner releases and handover of West Bank towns are part of a package of goodwill gestures designed to build confidence and pave the way to an eventual return to peace negotiations.