Shin Bet Chief Yuval Diskin and Prime Minister Ehud Olmert's special envoy, Ofer Dekel, left Cairo on Monday evening following days of intensive negotiations over a deal for the release of abducted Israeli soldier Gilad Shalit.

Upon their return to Israel, Diskin and Dekel were to head to the government compound in Tel Aviv to update Olmert of progress made during the talks.

A senior Hamas official on Monday denied reports that progress had been reached over a deal to free Shalit, who has been in Palestinian captivity since he was kidnapped in a 2006 cross-border raid from the Gaza Strip.

Hamas lawmaker Khalil al-Haya told Haaretz's correspondent in Egypt that the media had been embellishing news of recent developments in the affair.

Sources close to indirect Israel-Hamas negotiations over Shalit told Haaretz earlier Monday that a deal for the abducted Israeli soldier's release could be reached over the next 24 hours.

The Egyptian-brokered negotiations continued on Monday after Israel's Sunday deadline to Hamas was extended for another 24 hours. The sources said while outstanding issues still remained, a number of possible solutions were being examined.

They cited as an example Israel's demand that some of the Palestinian prisoners to be freed in the deal will be relocated to Syria, and not to the Palestinian territories.

According to the sources, Shin Bet security service chief Yuval Diskin and Ofer Dekel, who is Olmert's chief negotiator on the Shalit deal, may extend their stay in Cairo for a further 24 hours to continue the negotiations.

They were supposed to return from the Egyptian capital at around 8 P.M. Sunday night and report to Olmert on their indirect talks with Hamas in the Egyptian capital, but decided to stay on for a day for the same reason. Olmert's office issued a statement saying he wants to exhaust every possibility of reaching a deal.

Earlier Monday, Pensioner Affairs Minister Rafi Eitan said Israel's negotiators in the talks over would likely return from Cairo with a deal.

"It is possible to assume that [Prime Minister Ehud] Olmert's emissaries in Cairo will return to Israel with a deal for Shalit's return," said Eitan, speaking on Army Radio.

The negotiations were to continue Monday after talks that were supposed to end Sunday night were extended for another 24 hours.

"After this everyone can express remorse and say 'I told you so,' but let's just wait another day and see what the results are," added Eitan.

"I assume that the results will be positive. If an agreement is brought for cabinet approval, I have no doubt that it will vote in favor."

Report: Hamas military chief running Shalit talks

Meanwhile, the pan-Arab newspaper Al-Hayat reported Monday that the head of Hamas' military wing, Ahmed Jabri, is in Cairo heading the indirect negotiations with Israel over the Shali's release.

The London-based paper said Jabri, who has never left the Palestinian territories before, arrived in Cairo four days ago to assume the role in the talks.

Jabri has been responsible for Shalit's wellbeing in Gaza as well as safeguarding the secrecy of his hiding place. According to the report, which is based on Palestinian sources described as "credible," senior Hamas officials Mahmoud Zahar and Nizar Awadallah are also involved in the talks.

The newspaper also reported that Israel is willing to release 300 Palestinian prisoners out of 450 on a list presented by Hamas, but maintains its opposition to the remaining 150, some of whom have been convicted of involvement in terrorist attacks.

The cabinet was to have convened Monday morning to discuss the details of the deal, the first such meeting called since Shalit was taken captive in June 2006. However, that meeting has now been postponed to Tuesday.

Public Security Minister Avi Dichter, meanwhile, said on Monday that there were Palestinians jailed in Israel who were not up for release as part of a deal for Shalit.

He told Israel Radio that Israel had "additional ways" of pressuring Hamas, adding that if the negotiations involving prisoners currently held in Israel failed, they would be renewed over prisoners to be held in Israel in the future.

Abu Mujahad, a spokesman for the Popular Resistance Committees, told Haaretz Sunday that something is happening in the negotiations over Shalit, but since Israel has in the past reneged at the last minute on deals that were almost completed, neither his organization nor Hamas was willing to make any statements on the matter. The Resistance Committees are one of the three groups that originally kidnapped Shalit. Abu Mujahad was in Cairo for Egyptian-brokered reconciliation talks with the other Palestinian factions.

If the Cairo talks lead to a breakthrough, the ministers are expected to vote on Tuesday on the outlines of a prisoner swap. If a deal is presented by Olmert and supported by Dekel and Diskin, it is likely to be approved by a large majority of the cabinet.

Gilad Shalit's brother, Yoel, said Sunday that, "These are fateful hours for Gilad. The decision is whether he will live or be left to his fate. From our point of view, there is no other opportunity."

Transport Minister Shaul Mofaz, who visited the tent where the family is holding a vigil near the prime minister's official residence in Jerusalem, said he would support a prisoner swap if it came to a cabinet vote. "I have voiced my opinion in the past as well that everything must be done to bring Gilad home," he said. "That is the moral obligation of the State of Israel and of the present government."

Shalit was kidnapped raid by Gaza militants in a 2006 cross-border. He is widely believed to be still held in the Hamas-ruled coastal strip.