Negotiators have made significant progress in recent days toward a deal that would free Israeli soldier Gilad Shalit in return for 450 Palestinian prisoners that include senior militants and leading political figures, according to high-ranking sources from both sides.
For Israelis, such a deal would be a high price to pay for the freedom of one young soldier. For Hamas, the deal would be a significant political victory.
Shalit, 23, was taken by Hamas in a cross-border raid in 2006. He has been held in Gaza ever since. In that time, the only thing his captors have given his family are some letters, an audio tape and a video.
His family members have led an international campaign to win his freedom. There is widespread support for his release in Israel because almost every Israeli serves in the army doing compulsory service, as Shalit was on the day he was taken.
Hamas is demanding the release of senior members of different Palestinian factions held in Israeli jails. They include men responsible for planning numerous attacks against Israel and the deaths of hundreds of Israelis.
Israeli President Shimon Peres met Egyptian President Hosni Mubarak in Cairo Sunday and said "there is progress on the matter but it should be left for discussions behind the scenes."
Osama Hamdan, a senior Hamas member in Beirut added, "we are serious in our intention but it is clear it will not be possible to reach a happy ending as long as the enemy prime minister [Benjamin Netanyahu] has not met our demands and our terms."
A Hamas delegation from Gaza and Damascus is due in Cairo today to review final changes to the list of Palestinian prisoners. If the names on the list are approved, the deal could move forward quickly, perhaps by the end of the week, the sources said.
Some of the released prisoners would be sent to Gaza or third countries to minimize their influence on Palestinian politics.
Barghouti Set for Exile in Gaza or Cairo
Among the group will be Marwan Barghouti, a former grassroots political leader from the West Bank whom the Israelis found guilty of organizing attacks.
He is serving multiple life sentences but is seen by some as a future national leader of the Palestinians capable of uniting the conflicting parties of Hamas and Fatah.
The breakthrough in the talks has been achieved with the help of an unnamed German mediator. He has been coordinating negotiations with the help of the head of Egyptian intelligence.
If a deal is struck, Shalit is expected to be released in Cairo where he will be met by his family before returning home. The Palestinians will be released in batches.
Israeli Prime Minister Benjamin Netanyahu may face stiff opposition to the deal from within his own cabinet.
The head of Israel's army, Lt. Gen Gabi Ashkenazi, and defence minister Ehud Barak, mindful of army morale, are both in favor.
But leading figures from Israeli intelligence and several ministers fear the deal will set a dangerous precedent and encourage future kidnappings.