An Arab-Israeli man jailed in Egypt seven years ago on spying charges has been freed and returned to Israel.
Azzam has always denied the spy charges
Azzam Azzam was exchanged with six Egyptian students arrested by Israel in August this year on suspicion of planning to abduct Israeli soldiers.
"He... screamed 'I am born again'," a witness said, as Azzam passed through an Israel checkpoint near Eilat.
The moves follow a visit to Israel last week by Egypt's foreign minister and its influential intelligence chief.
Azzam's imprisonment has been a frequent point of friction, says the BBC's Simon Wilson in Jerusalem.
And the prisoner exchange deal may be a forerunner of better relations between the neighbours, our correspondent says.
Egypt is reported to be considering sending an ambassador back to Tel Aviv after a long absence and taking on a security role in the Gaza Strip, with Israel due to pull out next year.
The two countries signed a peace deal in 1979, but relations have remained cool and worsened after the beginning of the Palestinian intifada in 2000.
Israeli Prime Minister Ariel Sharon is also considering shortening the sentences of some Palestinian militants, as part of the rapprochement, which comes in the wake of the death last month of veteran Palestinian leader Yasser Arafat.
The state security court in Cairo sentenced Azzam, 41, a member of Israel's minority Druze community, to 15 years in prison in August 1997.
An Egyptian accomplice, Emad Abdel-Hamid Ismail, was given 25 years.
Azzam, an Israeli textiles worker who always maintained his innocence, was convicted of helping to send news about Egyptian industrial cities to Israel's intelligence agency, Mossad.
He was said to have communicated secret messages in invisible ink written on women's underwear.
He was charged with being the link man between the Israeli intelligence and the Egyptian.
Egypt and Israel were at war for 30 years
In 1979, Egypt became the first Arab state to sign peace treaty with Israel
Cool relations turned icy over second Palestinian intifada
Cairo withdrew its ambassador from Tel Aviv in 2000
After crossing into Israel on Sunday, he thanked the Israeli government for helping bring about his release.
"Thank you for bringing me home and granting me a new life," he said.
His family had been kept in the dark about his impending release, brother Iftan said, according to
the Associated Press news agency.
Alongside Azzam and Ismail, two fugitive Israeli Arab women were given life sentences in their absence.
Israeli authorities arrested the Egyptian students for crossing into Israel illegally, armed with an airgun and 14 knives.
They accused them of plotting to kidnap Israeli soldiers to use as bargaining chips for Palestinian prisoners.