BEN WINOGRAD, JERUSALEM

Israel is reviewing the names of hundreds of Palestinian prisoners whom Gaza militants want freed in exchange for a captured Israeli soldier, signalling a possible breakthrough in efforts to win his freedom.

However, both Israeli and Palestinian officials said a deal remains distant.

Corporal Gilad Shalit, 20, was captured in June by militants linked to the Islamic Hamas group who tunnelled into Israel from the Gaza Strip and attacked an army post. He has not been seen or heard from since, but Israeli officials believe he is alive.

Israel considers Shalit's release a precondition for any serious progress in peace talks with the Palestinians. A prisoner exchange also could lead to wider acceptance of the new Palestinian government, a coalition of the moderate Fatah party and Hamas. The moderate Palestinian president, Mahmoud Abbas of Fatah, predicted last week that Shalit would be freed soon. Prime Minister Ismail Haniyeh of Hamas has also said he would like to see the issue resolved quickly.

The militants holding Shalit have repeatedly demanded a large-scale release of Palestinian prisoners in exchange for the soldier. After months of deadlock, officials on both sides confirmed two days ago that the Palestinians had submitted a list through Egyptian mediators.

An Israeli official said the Shin Bet security service was reviewing the list and would give recommendations to Prime Minister Ehud Olmert.

Israeli newspapers said the Palestinians were demanding the release of as many as 1300 prisoners, including some "with blood on their hands", a reference to those involved in attacks on Israelis.

Israeli and Palestinian officials said despite the progress, there were no guarantees a deal would be reached.

"It's true that the Palestinian side presented a list of names, but that doesn't mean that the Israeli side accepted it," said Yasser Abed Rabbo, an aide to Abbas.

"I would be very wary . . . there is still a long way to go," said Cabinet Minister Yitzhak Herzog.-AP