Israel refuses to release 40 Palestinians whom the Islamic Hamas movement demands for freedom in a prisoner exchange deal a well-informed Palestinian source said on Tuesday.

The Israeli reservations on the 40 names delayed the prisoner swap deal, which German and Egyptian mediators have tried to broker, the source told Xinhua.

"Accomplishing the swap within one week is unexpected, it is almost impossible," the source said.

Under the deal, Israel will release hundreds of Palestinian and Arab prisoners in exchange for Gilad Shalit, an Israeli Corporal Hamas has been holding hostage since 2006.

"Differences between the two sides are still going on, involving a big number of prisoners from Gaza, the West Bank and those who live in the 1948 territories (Israel)," the source added.

The source denied reports that a list of 450 prisoners, who would be freed in the first phase of the exchange, had been agreed upon.

The reports about a breakthrough in the indirect negotiations between Hamas and Israel have fueled speculations that the swap would take place in days.

The source said progress has been made in which Israel agreed to free all jailed women and children. Israel used to reject Hamas' demands that the young and female prisoners be released in Shalit's deal.

Earlier, a delegation from Islamic Hamas movement, which controls the Gaza Strip, crossed into Egypt for a meeting with Egyptian security officials in Cairo to discuss the deal that Egypt and Germany have been mediating.