Hamas and Israel could be about to agree on an Egypt-mediated prisoner swap, security officials in Cairo said on Wednesday.
The Egyptian officials said that Israeli Prime Minister Naftali Bennett's government wants the deal implemented before it will allow the reconstruction of Gaza to go ahead.
The officials said an agreement could be announced "very soon", but did not give a timetable.
They said the militant Palestinian group Hamas wanted Egypt to extract a pledge from Israel to agree to a three-year truce in Gaza. Israel wants Hamas to offer assurances that it will not take advantage of the planned reconstruction to upgrade its military capabilities, especially its arsenal of rockets.
According to Israeli media reports, Hamas is holding two Israeli civilians – Avner Mengistu and Hisham Al Sayed. It also has the bodies of two Israeli soldiers – Oron Shaul and Hadar Goldin – who were killed in the 2014 war between the sides.
Hamas wants Israel to release more than 1,100 prisoners in exchange. Israel, according to the Egyptian officials, want to release the Palestinian prisoners in batches, starting with older inmates, women and minors.
Hamas leaders have been indirectly negotiating the deal with Israel while in Cairo this week, with officials from Egypt’s General Directorate of Intelligence, the country’s top spy agency, acting as a go-between.
Israel does not directly negotiate with Hamas, which it considers a terrorist group.
Egyptian intelligence officials have traditionally taken the lead in dealing with both Israel and the Palestinians.
Egypt, which has borders with Gaza and Israel, negotiated a truce in May that ended an 11-day war between the two in which at least 250 Palestinians were killed in hundreds of Israeli air strikes on Gaza. Rockets fired by Gaza militants killed 13 people in Israel.
The Egyptians have been keen to pave the way for a resumption of Palestinian-Israeli negotiations, which collapsed seven years ago.
Their top priority is to strengthen the truce between Hamas and Israel, and reconcile Palestinian factions as a precursor to Gaza reconstruction, possible Palestinians elections and, finally, a resumption of peace talks.
Hamas and the Fatah-dominated Palestinian Authority have been at odds since the militant group in 2007 seized Gaza from the PA, which exercises limited self-rule in the West Bank.
Egypt has traditionally played a mediating role in the Arab-Israeli conflict alongside the US. Its role has been made possible, and credible, by its own US-sponsored 1979 peace treaty with Israel and its common borders with Gaza and Israel.