Israel and Lebanon's militant Hezbollah movement were due begin an exchange of prisoners at 9 am (0600 GMT) Wednesday with the handover of the two Israeli soldiers, widely presumed dead, to be followed by the transfer of five Lebanese fighters, reported dpa.
Israel was due to hand over five Lebanese fighters in exchange for two of its soldiers whose abduction in a cross-border Hezbollah raid on July 12, 2006 sparked Israel's 33-day invasion and bombing of Lebanon.
The International Committee of the Red Cross is coordinating the swap, which is expected to include a man Israel considers a cruel murderer in exchange for the bodies of the two soldiers, for which the Israel Defense Forces has made funeral preparations.
Soldiers Eldad Regev and Ehud (Udi) Goldwasser were expected to be brought at the Rosh Hanikra/Naquora crossing on the Israel Lebanon border at 9 am for identification in a process which may take several hours, Israel's online Ynet news website reported.
Israeli army officials would then inform the families of the two of their fate, the report said. Israeli authorities would then hand over five Lebanese fighters, including Samir Kuntar, its longest-held Lebanese prisoner an four Hezbollah fighters captured during the war.
Israeli President Shimon Peres on Tuesday pardoned Kuntar who was serving multiple life terms for a bloody 1978 attack in northern Israel in which he and his men killed four Israelis, including a father and his daughter.
Peres, in a letter to Justice Minister Daniel Friedman, said the decision had been difficult and came after he spoke to the families of Kuntar's victims.
Israel's cabinet on Tuesday gave the final approval for the United Nations-mediated, German-brokered deal, with three ministers including Friedman voting against it, saying they refused to trade live prisoners for dead soldiers.
Welfare Minister Isaac Hertzog described the decision to release the fighters as "painful."