There has recently been speculation about a prisoner swap
Members of the Palestinian Islamist group, Hamas, are in Cairo to discuss a prisoner swap for the captured Israeli soldier, Gilad Shalit, sources say.
Hamas and Israel are said to be close to agreement on a list of hundreds of Palestinians who would be released.
Sgt Shalit was seized just across the border from Gaza during a raid by Palestinian militants in June 2006.
However, Israeli Prime Minister Benjamin Netanyahu has sought to lower expectations of an imminent deal.
There is no doubt that real progress has been made on the issue of Gilad Shalit, but the details must be kept behind the scenes
Israeli President Shimon Peres
"Many details coming from abroad and in foreign media are being published lately, but they are not credible and some of them are even intentionally distorted," his office said in a statement.
"Efforts to secure Gilad Shalit's release are continuously under way, out of the media's view, and we have no intentions of commenting beyond that," it added.
Senior Israeli figures have long refused to say how the negotiations might be going, and the military continues to censor reports.
On Sunday, President Shimon Peres announced that "real progress" had been made, but that details had to be "kept behind the scenes".
Earlier, the Dubai-based al-Arabiya news channel quoted senior Hamas sources as saying a deal could be sealed within days, possibly in time for the Muslim festival of Eid al-Adha.
Palestinian sources said a meeting would take place in Cairo later on Monday between a Hamas delegation led by Mahmoud Zahhar and Egyptian security officials to discuss an exchange deal that Egypt and Germany have been trying to mediate.
Officials close to the talks say that in the first part of the deal, Hamas would hand over Sgt Shalit to Egypt and Israel would release between 350 and 450 prisoners.
Israel holds about 10,000 Palestinian prisoners in jail on security grounds
More prisoners - reportedly up to 650 - will be released when the soldier is transferred from Egypt to Israel, while others may be freed several weeks later, they add.
The BBC understands the two sides had differences over 70 names on the list which was initially supplied by Hamas. The Israelis are believed to have said the prisoners did not meet their criteria for release.
A compromise list has reportedly been provided, about which both sides are happy. It is understood that it includes the senior Fatah leader, Marwan Barghouti, who is serving five life sentences for murder in an Israeli jail.
Mr Barghouti is considered a candidate to replace Mahmoud Abbas as president of the Palestinian Authority. Mr Abbas announced earlier this month that he would not seek re-election because of the current impasse in the peace process.
The Hamas delegation will later fly to Damascus to discuss the prisoner list with the organisation's exiled leadership, Arab media say.
But the BBC's Christian Fraser in Cairo says an agreement on names is not necessarily a precursor for an imminent deal - there are still differences on where the prisoners will reside once freed.
The Israelis want to send some into exile rather than let them return to the West Bank or Gaza, and there is the outstanding issue of the Israeli Arab prisoners who Israel has refused to release, our correspondent says.
Months of hard bargaining are starting to bring results, and there is cautious optimism, but still potential deal-breakers that are yet to be overcome, he adds.
Earlier, Sgt Shalit's parents met Israel's negotiator, Hagai Hadas. Afterwards, they told reporters: "It is not the moment to talk."
There has been intense speculation in the media about a deal to secure Sgt Shalit's release before, but it has become more intense since German mediators became involved earlier this year.
In October, Hamas produced for the first time a video of their captive, in return for Israel releasing 20 female Palestinian prisoners.
Sgt Shalit appeared in a video for the first time in October
In the video dated 14 September, Sgt Shalit, now aged 23, said he was "physically well", and added that his captors, whom he described as the al-Qassam Mujahideen Brigades, were "treating me fine".
He also suggested that the decision to release the video opened up a chance to strike an agreement to free him.
"I hope this government, headed by [Israeli Prime Minister Benjamin] Netanyahu, does not waste this opportunity to reach a deal," he said.
Israel holds about 10,000 Palestinian prisoners in jail on security grounds - a major bone of contention with the Palestinians.
Earlier this month, several Hamas MPs were freed without charge after the 40-month period of their administrative detention expired. Fifteen Hamas MPs and two from Fatah remain in detention.
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