Caretaker Prime Minister Ehud Olmert has said Israel will free 250 Palestinians as a "goodwill gesture".
The detainees would be released in advance of the Eid al-Adha Muslim holiday, Mr Olmert's spokesman said.
The announcement came as Mr Olmert met Palestinian leader Mahmoud Abbas for their latest round of talks in the troubled peace process, reported BBC.
Israel last freed jailed Palestinians, 198 of them, in August. In all about 11,000 are held in Israeli detention.