The Israeli cabinet has approved the release of 104 Arab prisoners to help restart peace talks with the Palestinians in Washington.
Prime minister Benjamin Netanyahu said the vote on Sunday was not easy for any in his cabinet, but there were sometimes tough decisions to be made for the good of the nation and this was one of them.
The BBC reports 13 members voted for the release and seven voted against.
Mr Netanyahu also said a referendum would be held on any peace agreement with the Palestinians.
The prisoners will be released in four stages over a number of months, linked to progress in the peace process.
Before the meeting, Deputy Defence Minister Danny Danon condemned the proposal:
"This is a political mistake, it is an ethical mistake,'' he told Israel Radio. The message we are sending the terrorists is that we eventually free them as heroes."
US Secretary of State John Kerry announced on 19 July that the talks would begin "in the next week or so".
Palestinian President Mahmoud Abbas has said he will also put any peace deal to a referendum.
The US State Department later announced that Israeli and Palestinian negotiators would resume talks in Washington on Monday evening and continue on Tuesday.
In a statement on Sunday, Mr Kerry said:
"Both leaders have demonstrated a willingness to make difficult decisions that have been instrumental in getting to this point.''
The issue of settlement-building halted the last direct talks in September 2010. The BBC says settlements are considered illegal under international law, although Israel disputes this.