The Hamas-affiliated speaker of the Palestinian parliament was freed Tuesday from an Israeli prison after serving the bulk of his three-year sentence.

Abdel Aziz Duaik is the most senior of dozens of Hamas politicians arrested after Gaza Strip militants loyal to the group captured an Israeli soldier in June 2006. The soldier, Sgt. Gilad Schalit, will mark three years in captivity on Thursday.

Hamas would not say whether Duaik, who was released into the West Bank, would resume his duties as parliament speaker. But the Palestinian parliament has not functioned since Hamas seized control of Gaza in June 2007, in effect creating a two-headed Palestinian government with Palestinian President Mahmoud Abbas ruling the West Bank.

Shopkeepers rushed over to Duaik after he crossed over into the West Bank, passing out sweets to celebrate his release.

"My body is free, but my soul is still in jail with the other prisoners," said Duaik, who is in his early 60s.

He declined to answer reporters' questions and said he would issue a statement from the Palestinian parliament in the West Bank city of Ramallah later in the day.

In December, an Israeli military court sentenced Duaik to 36 months in prison for belonging to Hamas. Duaik suffers from high blood pressure and diabetes. His lawyer, Fadi Kawasimi, said inmates' terms routinely are shortened by several months for good behavior.

Hamas says 35 more of their parliamentarians are still in Israeli prisons.

Also Tuesday, an Israeli group said the government has formulated plans to legalize 60 existing homes at an unauthorized settlement outpost in the West Bank and allow the construction of 240 other residences.

Such a move would flout a U.S. demand for a settlement freeze. It would also bolster the claim by Palestinians that the unauthorized outposts are intended to permanently seize land they want as part of their future state.

The plans were approved by Israel's defense minister, Ehud Barak, and filed with authorities in April, according to Bimkom, a private Israeli non-governmental organization that specializes in planning issues.

The Defense Ministry had no immediate comment.

The outpost, known as Water Reservoir Hill, is just several hundred meters (yards) from an established Israeli settlement, Talmon, not far from Ramallah, the seat of the Palestinian government.

It is one of more than 100 wildcat settlements that have been erected without official government approval but typically with the cooperation of government agencies.

"This is important because it shows that Israel is not only not evacuating outposts, but is turning them into what it considers legal settlements and expanding areas of control in ways that harm Palestinians," said Alon Cohen-Lifshitz, an architect at Bimkom.

Bimkom has filed an objection with planning authorities, along with residents of the nearby Palestinian village of al-Jania.