The prisoners were taken to Beituniya checkpoint, where celebrations began
Israel has released 198 Palestinian prisoners in what it calls a goodwill gesture to bolster Palestinian leader Mahmoud Abbas.
They include two convicted killers of Israelis who have been in detention since 1977 and 1979 and who are among the longest-serving inmates.
The release coincides with a visit to the region by US Secretary of State Condoleezza Rice.
Washington aims to achieve a Middle East peace deal by the year's end.
Reaching that target looks increasingly unlikely, as relations between Israel and the Palestinians have been strained in recent months, the BBC's Aleem Maqbool reports from Ramallah.
Palestinians have been unhappy at the expansion of the illegal Israeli settlements in the West Bank.
On a previous visit, Ms Rice criticised the policy.
Rare release
The prisoners underwent routine medical examinations on Sunday and met Red Cross representatives, prison officials said.
When Israel frees prisoners to weak elements without demanding anything in return, they remain weak
They were transported to Beituniya checkpoint near Ramallah, where they were greeted with cheers and applause.
They then boarded Palestinian buses for the short journey to Mr Abbas's presidential compound for an official celebration.
Palestinian Prison Affairs Minister Ashraf al-Ajrami said their reception would be like a "national wedding".
Correspondents say it is rare for Israel to free convicted killers of its citizens.
Said al-Attaba, 56, was jailed in 1977 for killing an Israeli woman and Mohammed Ibrahim Abu Ali, 51, was imprisoned in 1979 for killing an Israeli reservist.
Shaul Mofaz, one of the contenders to succeed Israeli Prime Minister Ehud Olmert when he steps down next month, condemned the release.
"When Israel frees prisoners to weak elements without demanding anything in return, they remain weak," he said.
"This is a decision conveying weakness and an acceptance of the existing situation," the Israeli politician said.
About 10,000 Palestinians remain in Israeli jails - nearly 700 of these are held in administrative detention without charge or trial.
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