The cabinet passed the measure, which applies only to prisoners who are members of Abbas's Fatah party, by a vote of 18 to seven, a senior government official told AFP.

The release was promised by Israeli Prime Minister Ehud Olmert during a Middle East summit in Egypt in late June as a goodwill gesture to Abbas, whom Israel would like to bolster after security forces loyal to the moderate leader were overrun in Gaza by militants from Hamas.

Palestinians welcomed the move as a "good start," but criticised its unilateral nature.

"We hope that all prisoners will be freed and our government will work toward this aim," information and justice minister Riyad al-Malki told AFP. "We will continue our pressure on the Israeli government to release all the prisoners."

But chief Palestinian negotiator Saeb Erakat criticised the fact the decision was not taken in coordination with the Palestinian side.

"A solution of the question of ... Palestinian prisoners will not be found by unilateral measures and gestures here and there," he said.

Speaking at the start of the cabinet meeting, Olmert said the prisoner release was aimed at encouraging Palestinian moderates.

"We are not doing this gesture out of some illusion that through it, we will change the face of the Middle East," said the Israeli prime minister.

"But we are doing it out of hope that we can use any means possible to strengthen moderate elements in the Palestinian Authority, to encourage them to move in a direction that could allow conditions to begin real talks," he said.

Olmert on Saturday rejected a preliminary list of names to be released drawn up by the Shin Beth internal security agency and the justice ministry, as the sentences of several of the people on it were due to end soon anyway.

Palestinian prime minister Salam Fayyad was on Sunday due to meet with senior Israeli officials after secretly encountering Defence Minister Ehud Barak last week, an official at his office told AFP.