Israel has said it will release some Palestinian prisoners after the two sides agreed to lay the groundwork to resume peace talks frozen for three years.
A "limited number" of "heavyweights" - who have been held in Israeli prisons for up to 30 years - will be released, Israeli Intelligence Minister Yuval Steinitz told public radio.
"There will definitely be a certain gesture here," he added.
His announcement came hours after US Secretary of State John Kerry revealed the breakthrough in negotiations.
John Kerry visiting the West Bank Mr Kerry said that as a first step Palestinian negotiator Saeb Erakat and his Israeli counterpart Tzipi Livni would meet him in Washington "to begin initial talks within the next week or so".
Foreign Secretary William Hague welcomed the announcement.
He said: "This is of course a beginning, not an end. Britain stands ready to do all we can over the coming weeks and months to support the parties and the US in their efforts to achieve a lasting peace for the Israeli and Palestinian people."
The last round of direct talks broke down in 2010 over the issue of Israeli settlements in the West Bank and east Jerusalem.
The issue of continued expansion of settlements remains one of the biggest stumbling blocks between the two sides.
According to a recent assessment by Israeli rights group B'Tselem, at least 4,713 Palestinians are imprisoned in Israel.
Mr Steinitz stressed that aside from the prisoner releases, Israel would not be compromising on "diplomatic issues".
He added that there was no agreement on a settlement construction freeze or on accepting the borders that existed prior to 1967 Six-Day war as the basis for talks as demanded by the Palestinians.
He said for their part the Palestinians had committed to "negotiate seriously" for "at least nine months" during which they would refrain from action at the United Nation and other international institutions.
John Kerry meets with Palestinian President Mahmoud Abbas in the West Bank Mr Kerry warned that while this was a significant step forward, the issues separating the sides were "difficult" and "complicated".
A US State Department official said Mr Kerry had wrenched a commitment from both sides "on the core elements that will allow direct talks to begin".
The Israelis and Palestinians remain far apart on final status issues including the borders of a future Palestinian state, the right of return of Palestinian refugees, and the fate of Jerusalem which both want as their capital.
Analysts cautioned against reading too much into the latest developments.
Chico Menashe, diplomatic commentator for Israeli public radio, likened the situation to "a half-baked cake Kerry removed from the stove. Kerry convinced the Israelis and Palestinians it was edible, and both sides agreed to eat it".
Predictably, the Islamist Hamas movement which runs the Gaza Strip rejected a return to talks, its spokesman Sami Abu Zuhri saying Abbas had no legitimate right to negotiate on behalf of the Palestinian people.
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