Myanmar pardoned a number of prominent dissidents and a former premier on Friday under a new prisoner amnesty, intensifying a surprising series of reforms by the army-backed regime.

The release of hundreds of political prisoners in the country formerly known as Burma has long been a top demand of Western nations which impose sanctions on the military-dominated nation.

Democracy leader Aung San Suu Kyi's opposition party hailed the release as a 'positive sign', raising hopes that the amnesty could be the most significant yet under the new nominally civilian government.

"We welcome the release. Some (dissidents) are on their way home already," said a spokesman for Suu Kyi's National League for Democracy party, without giving details about how many political detainees were freed.

Former student activist Min Ko Naing was among those included, his family said. "He will be released this morning. The authorities informed us already," his sister Kyi Kyi Nyunt told AFP.

Fellow student activist Htay Kywe, who was sentenced to 65 years in prison in 2007, was also among those pardoned, according to his family.

A government official said former prime minister and military intelligence boss Khin Nyunt, who was placed in detention after his ouster in a 2004 power struggle, was another on the list.

"Khin Nyunt will also be released," he told AFP. Officials announced late Thursday that an amnesty had been granted to about 650 inmates languishing in the country's jails.

President Thein Sein's latest amnesty, due to take effect on Friday, "aimed for national reconciliation and inclusiveness in the political process", a government official who did not want to be named told AFP.

The United States and the European Union, encouraged by steps towards reform by the government that came to power last year, are demanding the release of political prisoners before they will consider lifting sanctions on Myanmar.

About 200 political detainees were freed in October, but activists estimate there are still between 500 and more than 1,500 political prisoners in Myanmar's dilapidated jails.

Among those released in October were members of Suu Kyi's NLD and celebrated comedian Zarganar, a vocal government critic who uses only one name.

But many leading dissidents, including key figures involved in a failed student-led uprising in 1988, were kept behind bars.

A decision last week to cut prison terms for detainees ended in disappointment for the West as it failed to mention the plight of top dissidents, who also include monks, journalists and lawyers.

Washington said that move fell short of what it expects to reward reforms undertaken by the army-backed regime.

Myanmar's government, which in March last year replaced a long-ruling military junta, has raised hopes in recent months by reaching out to Suu Kyi's opposition party, and inviting high-profile visits from top Western officials.

It surprised even its critics last year by freezing work on an unpopular dam supported by powerful neighbour China, and on Thursday signed a ceasefire with a major armed ethnic group.

The country recently announced plans to hold by-elections on April 1 and Suu Kyi -- who was released from years of house arrest in November 2010 -- plans to stand for a seat in parliament in a constituency near the main city Yangon.

The 66-year-old Nobel Peace Prize winner said Wednesday that her country was 'on the verge of a breakthrough to democracy', in a taped message to an awards dinner in New York.

Thursday's ceasefire was with one of the country's leading ethnic rebel groups, the Karen National Union.

The signing raised hopes of an end to one of the world's longest-running civil conflicts in eastern Myanmar.