Palestinian leader Mahmoud Abbas told an Arab newspaper that there is a tentative agreement for the release of the Israeli soldier kidnapped by Hamas militants in Gaza two months ago.
Abbas said the soldier would be taken to Egypt and then it would be decided how many Palestinian prisoners would be released in exchange. Reports put the figure at 800.
Israeli officials confirm that Egypt is mediating, but deny reports that the deal is imminent, reports CBS News correspondent Robert Berger.
Israel will invite Abbas to resume long-stalled peace talks after Palestinian militants release a captured Israeli soldier, Vice Premier Shimon Peres said Tuesday.
In other developments:
Peres spoke a day after Olmert — long skeptical of Abbas' ability to deliver a peace deal — said Israel needed to talk with the Palestinians.
Gunmen linked to the Hamas group that rules the Palestinian Authority captured Cpl. Gilad Shalit on June 25 in a cross-border raid. Recent reports in the Arab press said a prisoner exchange was imminent, but Israel has not confirmed this. In the meantime, there has been no sign of life from the soldier since his capture.
Once Shalit is freed, Olmert will invite Abbas, a moderate from the Fatah Party, to talks based on the internationally backed "road map" peace plan, Peres told Army Radio.
"The moment this matter is solved ... this is what will happen," Peres said.
Israel is boycotting the Palestinian Cabinet because it is led by Hamas, which is sworn to Israel's destruction. Abbas is from the moderate Fatah Party, a Hamas rival.
Olmert had once been expected to forego talks with the Palestinians and try to draw Israel's final borders by unilaterally withdrawing from large chunks of the West Bank. But he has shelved those plans following Israel's recent war with Lebanese Hezbollah guerrillas, which cemented Israeli reluctance to make further territorial concessions.
Abbas advocates peacemaking with Israel, but in the past has conditioned new talks on the release of some of the thousands of Palestinian prisoners in Israeli jails. The hope for new talks was further clouded by Shalit's capture.
On Monday, Abbas ally Saeb Erekat said the Palestinian president was ready to talk.