Israel was on Wednesday waiting to hear when captive soldier Gilad Shalit would return home, a day after the Jewish state inked a deal with Hamas that will see 1,000 Palestinian prisoners freed.

Announcing the deal late on Tuesday, Israeli Prime Minister Benjamin Netanyahu said Shalit would be home within "days" but officials have so far given no specifics about how and when the deal will be implemented.

"We have concluded arduous negotiations with Hamas to release Gilad Shalit. He will be coming home in the next few days," Netanyahu said in a live address after the deal was signed.

If the accord is implemented, it will end an ordeal that has lasted more than five years for the young soldier, who has become a national icon in Israel since his capture by Gaza-based militants in June 2006.

It will also be a major political coup for Gaza's Hamas rulers, particularly vis-a-vis the Ramallah-based leadership of Palestinian president Mahmud Abbas.

The Israeli government formally approved the deal early on Wednesday.

The vote passed by 26-3, with ultra-nationalist Foreign Minister Avigdor Lieberman voting against it, alongside two other nationalist ministers, despite the support of Israel's top military and defence officials.

Hamas chief Khaled Meshaal confirmed the deal in an address from Damascus.

"Hamas and Israel have reached an agreement under which 1,027 Palestinians, of whom 27 are women, will be freed in two phases," he said, with 450 prisoners to be released "in one week," and another 550 "in two months."

Briefing reporters late on Tuesday, Shin Bet chief Yoram Cohen said 450 prisoners would be released within the coming days, 131 of whom would be sent home to Gaza.

Another 163 prisoners from the West Bank would also be sent to the coastal territory, he said, while a group of 40 prisoners from the West Bank would be released abroad.

A separate group of 96 prisoners would be allowed to return to their homes in the West Bank, and 14 of them would return to their families in east Jerusalem. Six Arab-Israelis would also be released to their homes, he said.

The deal includes the release of 27 women prisoners, two of whom will be sent overseas, Cohen added.

But he ruled out the release of influential Palestinian leader Marwan Barghuti and top PFLP militant Ahmed Saadat.

A list of the detainees was to be posted on the Israel Prisons Service later on Tuesday, officials said.

In Jerusalem, Noam and Aviva Shalit, parents of the captive soldier, were preparing to return to their home in northern Israel after spending nearly 16 months living in a protest tent outside Netanyahu's residence.

Excited well-wishers spent the night dancing and singing in and around the tent, which was slated to be dismantled on Wednesday.

The couple, who had walked to Jerusalem from their home in northern Israel in June 2010, had vowed not to return home until their son was released.

In Gaza, Hamas said "tens of thousands" of Palestinians had flooded streets to celebrate the expected release of the detainees.

The news was also welcomed by the Palestinian Authority, with president Abbas describing it as a "Palestinian national achievement," negotiator Saeb Erakat told AFP by phone from Venezuela.

French President Nicolas Sarkozy was "delighted" with the news and phoned Shalit's father to express his "joy that Gilad will soon be released," his office said in a statement.

Not everyone welcomed the deal, with some Israeli commentators warning it made Israel look weak and could lead to increased militant attacks.

But Cohen said the deal was the only way to bring Shalit home. "This is not a deal that we can say is good but if you want to bring Shalit home there's no other option," he told reporters.

Shalit was captured in a deadly cross-border raid on June 25, 2006 by militants from three Gaza-based groups including Hamas, the Popular Resistance Committees and a Salafi group called the Army of Islam.

The agreement comes after years of failed attempts, with the two sides disagreeing over the issue of which prisoners would be freed and where they would be released to, with Israel insisting that some go to Gaza or be exiled overseas.