Israel has agreed to a long-standing Palestinian demand to release Palestinian prisoners in order to resume peace talks.

The Israeli Finance Minister Yuval Steinitz said: "There will be some release of prisoners,"

Speaking to Israel Radio Mr Steinitz said: "I don't want to give numbers but there will be heavyweight prisoners who have been in jail for tens of years."

Meanwhile, Israel and the Palestinians laid the groundwork for resuming peace talks after an almost three-year stalemate.

US Secretary of State John Kerry gave few details.

He anticipated Israeli and Palestinian envoys would come to Washington soon for what would mark the launch of direct negotiations.

Mr Kerry said: "I am pleased to announce that we have reached an agreement that establishes a basis for resuming direct final-status negotiations between the Palestinians and the Israelis," 

He said: "The best way to give these negotiations a chance is to keep them private," he said, saying that the deal was still being "formalised" and he would therefore not discuss it in detail.

"We know that the challenges require some very tough choices in the days ahead," he added. "Today, however, I am hopeful."

Peacemaking has ebbed and flowed for two decades.

It last broke down in late 2010 over Israel's settlements in the occupied West Bank and East Jerusalem, where, along with in Gaza, Palestinians seek statehood.

The Palestinians, with international backing, have said that state must have borders approximating the territories' boundaries before Israel captured them in the 1967 Middle East War.

This is a demand hard to reconcile with the Jewish state's insistence on keeping swathes of settlements under any eventual peace accord.

Israeli and Palestinian officials cautiously welcomed Kerry's announcement.

Both sides face hardline opposition at home to compromise in a stubborn conflict of turf and faith.

A senior member of the umbrella Palestine Liberation Organisation said: "The announcement today did not mean the return to negotiations. It meant efforts would continue to secure the achievement of Palestinian demands.... Israel must recognise the 1967 borders."

Mr Kerry said that Livni and Palestinian negotiator Saeb Erekat could travel to Washington "within the next week or so, and a further announcement will be made by all of us at that time".