Prime Minister Benjamin Netanyahu agrees to the release of hundreds of Fatah prisoners as part of efforts backed by the United States and Egypt to jump-start the peace talks between Israel and the Palestinian Authority.

Netanyahu expressed a willingness to release prisoners as a goodwill gesture in talks with the special U.S. Mideast envoy, George Mitchell. Under the plan, Israel would also embark on low-level negotiations with U.S. mediation.

Last Sunday, after meeting with Mitchell, Netanyahu told the cabinet that he heard new ideas from the American administration on the efforts to resume peace talks.

"I expressed my hope that these ideas will enable the resumption of the process if the Palestinians express a similar interest in favor of all those who aspire for reconciliation in our region," the prime minister said.

A senior source in Jerusalem said Thursday that Netanyahu's comment referred to a new proposal by Mitchell and Palestinian President Mahmoud Abbas. Negotiations would take place in the format of proximity talks, similar to the indirect negotiations that Israel held with Syria under prime minister Ehud Olmert.

Mitchell proposes that he travel between Jerusalem and Ramallah, relaying messages to the two sides on various core issues, including borders, Jerusalem, refugees and security. At a later stage the talks might be taken over by low-level officials on both sides to evaluate if negotiations can be continued at top levels.

The proposal also included Israeli goodwill gestures that would be carried out at the start of the proximity talks the United States would conduct. The main goodwill gesture is expected to be the release of hundreds of Fatah prisoners to the West Bank.

The senior source in Jerusalem said that these would largely be prisoners with only a little time left in their sentences. Other goodwill gestures involve easing travel in the West Bank.

Netanyahu accepted Mitchell's proposal, according to the Israeli source. However, Netanyahu emphasized that the Palestinians must also agree to the plan.

Mitchell presented his proposal to Abbas but the Palestinian leader has not yet said whether he agrees.

"Abbas said that he will think about it and went abroad without offering an answer," the senior source in Jerusalem said.

Mitchell is expected to return to the region in the coming weeks to receive a response from Abbas.

Abbas traveled to Cairo Friday for a meeting with Hosni Mubarak. The Egyptian president is expected to pressure Abbas to respond positively to the American mediation proposal. Next week Abbas will visit Germany and Britain.

Meanwhile, Social Affairs Minister Isaac Herzog told Palestinian academics in Jerusalem Wednesday that the Palestinians are not correctly reading the situation in Israel regarding the current coalition.

"You are not correctly reading the exceptional opportunity that exists at this time," Herzog said.

"I believe that the leaders of a center-right government will go to a historic settlement. Do not miss an opportunity again."