Israel's military said it began digging up the bodies of Lebanese fighters yesterday after the government struck a deal with Hezbollah guerrillas to swap five living prisoners and dozens of bodies for two Israeli soldiers captured in 2006.

Israel said in a statement that the swap agreement was signed "in the presence of a U.N. representative." Implementing the deal depends on carrying out further steps, the statement said without providing specifics.

Hezbollah officials would not comment.

Israel approved the swap June 29. It will hand over Samir Kantar, serving multiple life sentences for a 1979 attack in Israel's north, as well as four Hezbollah prisoners and dozens of bodies of fighters. In return, Israel is to receive Ehud Goldwasser and Eldad Regev, two soldiers captured by Hezbollah in a 2006 cross-border raid that set off a fierce 34-day war.

Israeli Prime Minister Ehud Olmert declared the two soldiers dead before his cabinet approved the deal, but Hezbollah leader Hassan Nasrallah, who has not allowed Red Cross visits or given any sign that the two are alive, called the declaration "speculation."

Israeli military officials, who spoke on condition of anonymity because final arrangements had not been made, said the exchange was likely to take place by tomorrow.

Kantar was convicted of shooting a police officer, then killing an Israeli man in front of his 4-year-old daughter before beating the girl to death. Kantar denied killing the girl.

Yesterday, the officer's family appealed to Israel's Supreme Court to block the exchange. "Don't release Kantar. He is a despicable mass murderer, and Israel will be sorry in the end," the officer's daughter, Keren Shahar, said.

The court is not expected to intervene in the deal.

The military confirmed that the process of exhuming bodies had begun at the Amiad cemetery for enemy combatants, not far from the Israel-Lebanon border. It was declared a closed military zone to prevent reporters from witnessing the process.

In another aspect of the agreement, mediated by a U.N.-appointed German official, Hezbollah has compiled a report on the fate of Ron Arad, an Israeli airman captured alive after his plane was shot down over Lebanon in 1986. Israeli negotiator Ofer Dekel was in Europe yesterday to pick up the report, the military officials said.

But in announcing the signing of the swap agreement, government spokesman Mark Regev said Israel had not received the report. When it has, he said, "we will have discussions inside the government on how to move forward." Regev would not say where the signing took place.

In exchange for the report on Arad, Israel is to provide information on four Iranian diplomats who disappeared in Lebanon in 1982.

Iran, which supports Hezbollah, alleges that the officials were kidnapped by Lebanese militiamen allied with Israel and delivered to Israeli troops. Israel has long denied holding them, and Samir Geagea, former head of the disbanded Lebanese Forces, has said militiamen killed them.