Israel released five teenagers early as part of its deal with Hezbollah
Israeli PM Ehud Olmert has agreed to free 120-150 Palestinian prisoners later in August as a gesture of goodwill, Palestinian officials said.
Israel confirmed some prisoners would be released but would not say how many.
The announcement followed a meeting between Prime Minister Olmert and Palestinian leader Mahmoud Abbas.
It was their first talks since Mr Olmert announced he would stand down from his position after being questioned on corruption allegations.
Correspondents say Mr Olmert's decision to step down when his Kadima party selects a new leader is likely to complicate efforts to reach a peace deal this year.
Israel is reported to be holding between 8,500 and 11,000 Palestinian prisoners, including several hundred children.
Earlier on Wednesday, Israel released five Palestinian teenagers from detention as part of an exchange agreed in July with Lebanese group Hezbollah.
Israeli officials said the freed prisoners had not been involved in any deadly violence against Israelis and their jail terms had under 18 months to run.
The Palestinian Authority wants the next batch of releases to include long-serving prisoners, women and children and political leaders.
Government spokesman Mark Regev said Israel hoped the move would advance the peace process.
There has been speculation Israel could release intifada leader Marwan Barghouthi, but Mr Regev refused to say who might be freed.