Israel will release 980 Palestinians in exchange for a soldier captured in 2006, its State Attorney's Office said Sunday.

The office said Hamas will select 450 names and Israel will choose the rest.

The announcement came after an activist group petitioned the country's Supreme Court against a swap deal, according to the Hebrew-language daily newspaper Yedioth Ahronoth.

In response, the State Attorney's Office disclosed, "As part of an agreement with Hamas, which would allow the return of soldier Gilad Shalit to Israel ... there is a possibility for the release in principle of about 450 prisoners whose names are being delivered by Hamas."

Some 530 Palestinians selected by Israel will also be released "[a]s a gesture to the Palestinian people" in a second stage of the deal, the office added. "The list of these prisoners has not been formed yet and no criteria have been set on this matter."

The office stressed that "contrary to the release of prisoners as part of a gesture and/or diplomatic agreement, this is an incident of bargaining, which can be seen as an ongoing terror attack, as part of which negotiations are being held to reach the lowest price possible as far as the State of Israel is concerned."

State defends military censorship

The State Attorney's Office was responding to a petition filed by a group called the Almagor Terror Victims Association and the fathers of three Israeli children said to have been killed by Palestinians. They were demanding to know why the government was using its military to ban the publication of news items reporting details of the prisoner exchange.

The office responded by saying Hamas and Israel had agreed to a request from a foreign mediator that both sides refrain from discussing the talks "as a condition for the negotiations."

Other state representatives added that "the military censorship is authorized to ban the publication of a certain [news] item, when it reaches the conclusion that publishing that item would most probably substantially damage the possibility of returning soldier Gilad Shalit."

Also Sunday, an informed Palestinian source told Al-Jazeera that a German mediator will meet Hamas leaders this week to receive the movement's final response to Israel's offer. The source said negotiations will be completed in Gaza, and that Hamas wants to clarify certain safeguards required to complete the deal.

Responding to reports by Israeli analysts on Sunday evening the deal was weeks away, Al-Jazeera's source denied that negotiations with Israel had reached an impasse.

According to the source, the chief obstacle has become the United States, which believes the deal would strengthen Hamas and consequently weaken the Fatah-led Palestinian Authority in the West Bank. The US is demanding that it be put off or altered because it inordinately favors Hamas, the source said.

Meanwhile, the London-based Guardian newspaper's Sunday edition, The Observer, reported that the Israeli intelligence agency Mossad has recommended that Fatah leader Marwan Barghouti not be freed in the deal.