After Ynet reported on Monday that aides close to Tanzim official Marwan Barghouti and Popular Front for the Liberation of Palestine leader Ahmed Saadat received in formation that they will be released as part of a prisoner exchange deal for the released of Gilad Shalit, Deputy Prime Minister Silvan Shalom was quick to deny the reports.

But on Tuesday, London-based Arabic-language newspaper al-Hayat published a similar report, and quoted Palestinian sources as saying that unprecedented progress has been made in talks, and that Israel has agreed to release both Saadat and Barghouti.

According to the report, Israel has agreed to allow Saadat to return to his home in Ramallah, despite its prior insistence that he be exiled out of the West Bank.

The paper further reported that Israel has agreed to release Barghouti and that his family had received a report that his name was on the list of prisoners slated to be released.

The report said Fatah official Hussein al-Sheikh met with Barghouti in prison on Monday.

Palestinian sources told the paper that the next two days will be crucial, and Hamas sources said they would will not give in or sign a deal until all their demands are met. The sources said that while much progress has been made, certain details have yet to be finalized and "the optimism is misplaced".

The sources told al-Hayat that the German mediator in talks gave Hamas the guarantees they demanded, according to which Israel will not assassinate or arrested any of the prisoners released in the deal.

Prime Minister Benjamin Netanyahu on Monday wished to lower expectations in light of the numerous reports in foreign media, saying, "There is no deal yet, and I still do know when there will be a deal. This is not just up to us. There is internal conflict on the other side as well."

Prisoners anxiously follow reports

Meanwhile, thousands of Palestinian prisoners in Israeli jails are anxiously following media reports of progress in talks.

One prisoner said on Monday that the report of a deal being held up over the name of just one prisoner refers to a prisoner staying at the same facility as him.

The prisoner told Ynet that as of yet, no special preparations for the release of prisoners have been made.

"All the prisoners are talking here," he said in a talk with Ynet. According to the prisoner, "Some of the information comes from phone calls, from relatives; some of it comes from the media that we get here. "We watch all three Israeli television stations."

He added that Arab networks such as al-Arabiya, Falasteen, al-Manar, al-Jazeera and al-Aqsa, are not permitted in the prison.

The prisoner said that his fellow inmates are tense, especially in light of reports that hundreds of prisoners will be released as a goodwill gesture to Palestinian President Mahmoud Abbas, if the deal is executed.

"These reports are just making people crazy, and there is no other subject of discussion besides this," he said. "Sometimes a prison guard or an administration representative comes by and says something he heard and causes frenzy in the entire wing."