Israel is still holding about 8,500 Palestinians, according to official Israeli figures. The Palestinian Authority says 11,000 Palestinians are behind bars in Israel.
The prisoners were released just a few hours before US Secretary of State Condoleezza Rice arrived in Israel seeking to push forward peace talks between the Israelis and the Palestinians.
The freed prisoners were greeted by friends and relatives at the Beituniya checkpoint between Israel and the West Bank.
The prisoner release is controversial in Israel because it includes two convicted killers of Israelis.
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