Less than a year ago, Hamas was cowering under an Israeli military onslaught that pulverised much of its political and military infrastructure.

Now, in a reversal of fortune that must surprise even its leaders, Hamas is poised for a political triumph with the potential to transform its standing and Palestinian politics for years to come.

The Islamist group, according to several officials, is closing in on a deal that would see hundreds of Palestinians released from Israeli jails.

These are expected to include high-profile political leaders and militants serving multiple life sentences for bomb attacks on Israeli civilians. In return, Hamas says it will free Gilad Shalit, the Israeli soldier it captured in June 2006 and has held in Gaza ever since.

Mohammed Shehab, a Hamas lawmaker and a member of the group's founding generation, says he is "confident" a deal will go ahead.

He sees the prisoner exchange as the key to ending the conflict between Hamas and the rival Fatah party and healing the damaging schism inside the Palestinian movement.

Mr Shehab and others say a prisoner swap would not only pave the way for a Hamas-Fatah reconciliation, but also remove the main obstacle towards holding presidential and parliamentary elections in the Palestinian territories next year.

"The release of Gilad Shalit must go-ahead before other issues can be solved," says Mr Shehab. "From our side, there is a real readiness to go ahead [with reconciliation]. We are not afraid of elections."

Formidable obstacles to reconciliation exist, even if a prisoner swap is agreed. It is far from clear that a weakened Fatah would be ready to bury the hatchet. The two groups fought bloody clashes in Gaza in 2007 that ended with Hamas taking over the strip.

Husam Ahmed, another Gaza-based Hamas politician, argues all the same: "The prisoner exchange will have a positive effect on the intra-Palestinian dialogue because it will unify the Palestinian people. The joy [shared by Palestinians] will improve the whole atmosphere."

He thinks a recent reconciliation document, drafted by Egypt and rejected by Hamas until now, "will be signed after the Shalit file is closed".

A prisoner exchange deal would also deliver a significant boost to Hamas's popular standing. "Hamas will promote a prisoner release as the achievement of the 21st century," says Mokhemra Abu Saada, a political science professor at Gaza's al-Azhar university. "I think Hamas will have no problem going to elections if that is the case."

Hamas officials say that a prisoner exchange would serve as a vindication of the group's belief that only force - not talks - can wrest concessions from Israel.