The release of 26 long-held Palestinian prisoners started late Tuesday in Israel, as vehicles carrying the inmates left the Ayalon prison near Tel Aviv, dpa reported.
Israel is releasing the first batch of prisoners as part of a deal to restart peace talks stalled for almost three years.
Some of the prisoners were to be taken to the Erez checkpoint and into the Gaza Strip, and the rest from the Ofer military prison to the West Bank.
Celebrations were planned in the Palestinian Territories, and Palestinian President Mahmoud Abbas was to receive some of the freed prisoners at his office in Ramallah.
Earlier Tuesday, however, Israel approved 890 housing units in a disputed Jerusalem neighbourhood - a decision likely to anger Palestinians as the second round of US-sponsored peace talks are to be held in the city on Wednesday.
The Israeli High Court rejected an appeal against the release, which was filed by relatives of Israelis killed in attacks committed or planned by the Palestinian prisoners.
The court decision cleared the way for the first group of 104 prisoners to be freed by Israel.
In New York, a United Nations spokesman said that Secretary General Ban Ki-moon will meet with political leaders in Jordan, Israel and the Palestinian Territories to show support for the Middle East peace talks.
Ban will travel to the Middle East this week and will first hold talks with Jordan's King Abdullah II. He will then go to Ramallah to meet with Abbas and Palestinian Prime Minister Rami Hamdallah.
During his visit, Ban will meet the lead Israeli and Palestinian negotiators as well as the US special envoy for the Israeli-Palestinian talks, Martin Indyk, said UN spokesman Eduardo del Buey.
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