Palestinian Authority sources said Sunday that the PA had already begun policing the West Bank city of Nablus without Israeli approval, following Israel's announcement that it had agreed to a PA request to allow the deployment of 500 police officers to enforce law and order in Nablus during daylight hours.

The government also approved Sunday the release of 91 Palestinian prisoners, as a goodwill gesture for the holiday of Eid el-Fitr, which marks the end of the Muslim holy month of Ramadan.

According to a statement released by the Prime Minister's Office, roughly one-third of the prisoners to be released are Gaza Strip residents.

In response to the prisoner release, Palestinian Authority Chairman Mahmoud Abbas said there can be no peace agreement while thousands more Palestinians remain in Israeli jails.

"The prisoner issue is at the crux of the peace process, and there can't be an agreement while thousands of prisoners are in Israeli jails," The Associated Press quoted Abbas as saying.

The prisoners slated to be released are members of the Palestinian factions Fatah, the Popular Front for the Liberation of Palestine (PFLP) and the Democratic Front for the Liberation of Palestine (DFLP), and are all considered without "blood on their hands" - meaning they were not directly involved in the killing of Israelis.

A government spokeswoman said the prisoners could be freed by Tuesday evening.

The PA has long demanded that prisoners serving lengthy sentences be released, and that names be decided through negotiations. Abbas noted that many Palestinian prisoners have served 30 years or more in Israeli jails.

Israel holds roughly 11,000 Palestinian prisoners, many imprisoned in the past seven years of conflict. Because so many Palestinians have relatives imprisoned in Israel, releases are seen as an effective way of swaying Palestinian opinion in favor of moderation after more than a decade of failed negotiations drove many to support Hamas, which wrested control of the Gaza Strip in June.

The original list contained 100 names, but 10 prisoners were removed after it emerged that they did not fulfill all the criteria. The updated list of 91 names will be brought before the cabinet subcommittee for the release of prisoners later Sunday for individual approval. After it is approved, the list will be published, and the public will be given 48 hours to appeal.

Sixteen cabinet ministers voted in favor of the release, while six voted against. Shaul Mofaz (Kadima), Yitzhak Aharonovich (Yisrael Beiteinu) and four members of Shas voted against the prisoner release. Yisrael Beiteinu Chairman Avigdor Lieberman abstained.

Prime Minister Ehud Olmert said Sunday at a Kadima ministers' meeting that the release of Palestinian prisoners is a gesture that Israel extends to the Palestinians every year at Ramadan.

"The criteria are the same [each year], and the release will not harm efforts to secure the release of [abducted Israel Defense Forces soldier] Gilad Shalit, because the prisoners are also included on Hamas' list," Olmert said, referring to a list of prisoners that Hamas, who is holding Shalit, seeks to exchange for the captive soldier.

The United States will invite the members of an Arab League panel that includes Syria, Lebanon and Saudi Arabia to a Middle East peace conference it plans to hold this year, a senior U.S. official said on Sunday.