The prisoners arrived at Beitunia, near the West Bank city of Ramallah, after a two-hour journey from the Ketziot prison in southern Israel. The prisoners got off Israeli buses and kissed the ground before boarding a Palestinian bus. An ecstatic crowd of waiting relatives clapped and waved Palestinian flags.
Israel also was expected to free 30 Palestinian prisoners in the Gaza Strip, but the release was delayed. Officials gave no explanation for the delay.
But as the prisoners headed home, Israel said it was moving forward with plans to open a new West Bank police headquarters, despite U.S. concerns that development in the area harms prospects for establishing a viable Palestinian state. The Palestinians accused Israel of undermining new peace efforts.
Israel was freeing a total of 87 prisoners.
Most of the prisoners are from the West Bank, which is controlled by Abbas and his government of moderates. The others are residents of Gaza, which has been ruled by Hamas since June, when they defeated the forces of Abbas' Fatah movement and took control of the coastal territory.
Israeli Prime Minister Ehud Olmert announced the prisoner release - the second since July - last month as part of his strategy to support Abbas in his power struggle with Hamas. The prisoners are mostly members of Fatah, along with several who belong to smaller Palestinian factions. None belong to Hamas.
Israel is holding around 11,000 Palestinian prisoners, and their release is a central Palestinian demand. While many of those released Monday were serving time for militant activity, none was convicted in attacks on Israelis.
In Gaza City, a group of Palestinians with relatives in Israeli prisons gathered at the Red Cross offices, holding photographs of their imprisoned loved one.
One mother, Fatima Kaisi, said her 24-year-old son Mohammed is serving a 250-year sentence for his involvement in the radical militant group Islamic Jihad.
"I'm happy for the mothers who are getting their sons back today, but the leaders have to know that there are hundreds of mothers and families still waiting to meet with their loved ones," Kaisi said.
In other developments:
"People are very upset that the proposed peace that was supposed to come after disengagement has not come," Meidad said. The government has warned the settlers that if they do not leave voluntarily, they will be removed by force.
So far, the two sides haven't agreed on how specific the joint document should be. The Palestinians want a detailed framework agreement, while Israel wants a statement that is shorter and more vague.
But even with peace efforts gaining steam, Israeli officials said they are determined to open the new West Bank police headquarters in the coming months. The project is in area just east of Jerusalem known as E-1.
The U.S. has blocked past Israeli efforts to develop the five-square-mile area. Development plans envision 3,500 homes, several hotels and an industrial park there, but have been frozen under U.S. pressure.
The E-1 project, if completed, would effectively cut off eastern Jerusalem, the Palestinians' hoped-for capital, from the West Bank hinterland. Palestinians and Israeli human rights groups accuse Israel of trying to consolidate control over West Bank land east of Jerusalem, with the help of a massive separation barrier and new highways.
Israel's public security minister, Avi Dichter, told the Haaretz daily that police officers would move to the new building by the end of the year. Haaretz quoted Dichter as saying Israel was not seeking U.S. consent for the move.
Dichter's spokesman, Yehuda Maman, that "what is planned is what will happen, we aren't talking about `if."'
Palestinian negotiator Saeb Erekat warned that Israel is undermining fledgling peace efforts. In November, the U.S. is to host a Mideast conference in hopes of relaunching negotiations on final Israeli-Palestinian deal.
"I believe the continuation of such policies, creating facts on the ground, is undermining efforts that are being exerted to show that peace is possible," Erekat said.
Stewart Tuttle, a U.S. Embassy spokesman in Tel Aviv, said neither side should take steps that prejudice the outcome of a final peace deal, but that it's up to Israelis and Palestinians to work out their disagreements.
"We are already on a very positive path of discussions between the parties themselves ... and that is where everyone's focus should be," he said.
Israeli officials have said the conference would at best point negotiators in the right direction, but not yield solutions to the "core" issues, such as division of the disputed city of Jerusalem and future borders.