Israeli Prime Minister Ehud Olmert has said he will be prepared to release Palestinian prisoners in return for a soldier captured by Palestinian fighters last June.
In a major policy speech, Mr Olmert said he was reaching out to the Palestinians for peace - offering a series of humanitarian and economic incentives if violence against Israel ceased.
Israeli Prime Minister Ehud Olmert
However, he said any resumption of peace talks on the soldier's release was conditional on acceptance by any Palestinian unity government of international demands to renounce violence, recognise Israel and accept existing interim peace accords.
"With Gilad Shalit's release and his return safe and sound to his family, the Israeli government will be willing to release many Palestinian prisoners, even those who have been sentenced to lengthy terms," Mr Olmert said.
It was the first time that the premier had specially spoken of exchanging prisoners for Shalit, whose capture in a cross-border raid by Palestinian militants triggered a five-month-old Israeli offensive into the Gaza Strip.
Mr Olmert was speaking a day after a truce took hold in Gaza, designed to both halt the offensive and end rocket fire into Israel by Palestinian militants.
The ceasefire is seen as a step to reviving peace talks that collapsed in 2000 before the start of a Palestinian uprising.
Mr Olmert said he would meet Palestinian President Mahmoud Abbas for a "serious dialogue" once such a government, that accepted Western terms, was in place and Shalit was released.
The Israeli leader said that if Palestinian violence against Israel stopped, the government would be ready to ease travel restrictions and free up funds that were frozen when Hamas took office.
Doubts over how long the Gaza truce might last deepened today when Israeli troops killed a militant commander and a 50-year-old woman in the occupied West Bank. The ceasefire does not extend to the West Bank