The latest release of Palestinian prisoners by Israel is widely being seen as an effort to bolster Palestinian President Mahmoud Abbas' Fatah movement, currently in a bitter power struggle with the radical Islamist group Hamas, which seized control of the Gaza Strip in June.
The first 140 Palestinians to be freed boarded three buses at the Ketziot Prison Camp in southern Israel, subsequently heading toward the West Bank city of Ramallah.
A total of 408 Palestinians are to be sent to the West Bank, with 21 more going to Gaza. None of the released prisoners have ever been directly involved in the deaths of Israeli citizens and have all pledged not to take part in terrorist activities in the future.
The Palestinian National Authority had earlier requested the release of 2,000 of the some 10,000 Palestinians currently being held in Israeli prisons, making it one of the key demands for any future peace settlement. Israel has so far released about 770 prisoners since July.
Last week's U.S.-sponsored Mideast conference in Annapolis produced a joint statement signed by Israeli Prime Minister Ehud Olmert and Palestinian leader Mahmoud Abbas, including an agreement to broker a peace deal by the end of next year.
However, Olmert cast a shadow on the success of the Annapolis forum on Sunday, by saying that Israel did not recognize the 2008 target date as a deadline.
"There is no commitment to a specific timetable regarding these negotiations," Olmert told his Cabinet.
He also said that before any peace deal could be brokered, Palestinian authorities must put a stop to attacks by militants against Israel.
Meanwhile, Israeli army killed four Palestinian militants and wounded eight civilians in Gaza on Monday, local radio cited emergency services and Hamas officials as saying.
Israeli military said that the militants were preparing to launch mortar shells at Israeli territory.
According to army reports, Gaza-based Palestinian militants have fired over a dozen rockets and mortar shells into southern Israel in the past 24 hours.