Hamas on Tuesday accepted an Israeli offer to free 450 Palestinian prisoners in the second stage of a deal that would see the release of Israel Defense Forces soldier Gilad Shalit, who was abducted from his army base on June 25.

Palestinian sources told Haaretz that under the terms of the proposal, Hamas would give Israel a video showing that the 20-year-old Shalit is alive, and in exchange, Israel would release an as-yet undecided number of women and minors held in its jails.

Next, Shalit would be transferred to Egypt, and then to Israel; at the same time, Israel would release the 450 Palestinian prisoners.

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Finally, about two months later, Israel would release additional prisoners. Israel would be authorized to decide both how many and which prisoners to free at this stage, but has promised to be "generous," the sources said.

Hamas will transfer to Israel, via Egypt, a list of prisoners it wishes to see freed. Israel has not, however, yet agreed to the list of names, and a dispute over which prisoners will be released could delay the process further.

The list compiled by Hamas includes senior figures in the group's political and military wings, and Fatah members such as Marwan Barghouti.

Hamas spokesman Fuazi Barhum confirmed that Egyptian intelligence chief Omar Suleiman met in Saudi Arabia with two top Hamas officials - political leader Khaled Meshal and Palestinian Prime Minister Ismail Haniyeh.

On Sunday, an Egyptian security delegation to Gaza met with Palestinian Authority Chairman Mahmoud Abbas to update him on the agreement between Israel and Hamas regarding the number of Palestinian prisoners to be freed.

Nevertheless, the Egyptian team said that there was some dispute over the identities of those to be freed by Israel, and that Hamas was awaiting Israel's response to its list.