The Israeli government's inner security cabinet on Tuesday approved a deal to exchange Egyptians held in its prisons for alleged American-Israeli spy Ilan Grapel, a government statement said.
"The inner cabinet ministers unanimously authorised the proposal for the release of Israeli citizen Ilan Grapel," the statement from Prime Minister Benjamin Netanyahu's office said.
"Grapel is expected to arrive in Israel on Thursday."
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It said that the 14-member panel agreed that Israel would free 25 Egyptians from its custody, including three minors, in return for Grapel.
A previous government statement said that none of those being released were held for security offences.
Grapel, a 27-year-old dual US-Israeli national who has been in custody since June 12, is accused of being an agent of Israel's Mossad intelligence agency and of sowing sectarian strife and chaos in Egypt during the uprising which ousted president Hosni Mubarak in February.
Israel has strongly denied the claims, insisting the whole thing was a mistake and accusing Egyptian authorities of "bizarre behaviour."