An Israeli soldier may be one step closer to being released, with word Sunday that Israel is reviewing a list of hundreds of Palestinian prisoners the captors want released as part of an exchange deal.
Observers see the movement as a glimmer of hope in the long standoff since Cpl. Gilad Shalit was seized on June 25 in a raid into Israel.
Israel has maintained that Shalit's release is necessary before there will be progress in Israeli-Palestinian peace efforts.
A trade could benefit both sides, giving some international credibility to the new Palestinian unity government, which is a coalition of the Islamic militant group Hamas and Fatah, a more moderate movement.
There are conflicting reports about the details of the captors' demands.
Some reports said the prisoner list contained 500 names, while another said it had upwards of 1,000.
One of the prisoners reportedly on the list is Marwan Barghouti, the Palestinian uprising leader who is serving five consecutives life sentences for his involvement in attacks that left four Israelis and a Greek monk dead.
The list was delivered to Israel via Egyptian mediators.
"If the Israeli government is serious, there is now a very good opportunity to end this chapter," said Barghouti, a distant relative of Marwan Barghouti, the uprising leader.
Israel's Shin Bet security service is reviewing the list and will give its recommendations to Prime Minister Ehud Olmert in coming days, the Yediot Ahronot daily reported Sunday.
Speaking on condition of anonymity, an Israeli security official confirmed to AP that the review is underway.
The militants who are holding Shalit initially demanded the release of 1,400 Palestinian prisoners. The list included women, minors and a number of long-serving prisoners. The revised list came after Israel balked at the original demand, unwilling to free prisoners involved in deadly attacks against Israelis.
About 9,300 Palestinian security prisoners are currently being held in Israel.
Yitzhak Herzog, an Israeli cabinet minister, told Israel Army Radio he was not involved in the negotiations, but that "I imagine that there is a certain progress, compared to what there has been until now."
"On the other hand I would be very wary ... because there is still a long way to go," he said.
Even as the developments were taking place, tensions were heightened by an Israeli air strike that killed a Palestinian militant and wounded two others in Gaza.
The Israeli military said it launched the strike after spotting the militant attempting to carry out a bomb attack.
