The controversial move was approved at a Cabinet level and is seen as a goodwill gesture to Palestinian Authority President Mahmoud Abbas in advance of U.S. Secretary of State Condoleeza Rice's visit this month, The Jerusalem Post reported Monday.
Included in the proposed prisoner release are Muhammad Abu Ali, who was convicted of killing an Israeli reservist, a Palestinian suspected of collaborating with Israel and Said Uteba, who planted three bombs in central Israeli cities.
Their proposed release was particularly controversial with defense and security leaders who argue it will not aid moderate Palestinian leaders and only encourage radicals, the Post reported.
"Instead of taking a position of attacking terror, the government is freeing terrorists with blood on their hands, in exchange for nothing," said Likud Party opposition leader Benjamin Netanyahu. "The inevitable result is that terror organizations will understand that they can send more terrorists to carry out more attacks in Israel -- and they'll know that one day, they too will be freed."