Buses carrying 477 Palestinian prisoners were on Tuesday headed for Gaza and the West Bank in the first stage of a swap deal to free captive Israeli soldier Gilad Shalit.
"All of the prisoners have left the prisons," Sivan Weizman, spokeswoman for the Israeli Prisons Service told AFP.
Along the Israel-Gaza border, an Israeli military spokeswoman confirmed that all the prisoners destined for Gaza and those to be deported overseas had reached the Kerem Shalom crossing at the southernmost point of the Israel-Gaza border.
"The third (and final) convoy of prisoners has arrived, everything is going to plan," army spokeswoman Avital Leibovich told AFP, denying there was any delay. She had earlier said the prisoners would enter Gaza around 6:30am (0430 GMT).
An AFP correspondent in Kerem Shalom saw the final two coachloads of prisoners had entered the crossing, escorted by two prison service vans.
The landmark deal between Israel and its bitter Hamas enemy will see Israel freeing a total of 1,027 prisoners in exchange for the release of Shalit, a soldier who has been held by Gaza militants for more than five years.
The long-awaited deal, which was signed last week, is the highest price ever paid by the Jewish state for one person.
And if all goes to plan, it will be the first time in 26 years that a captured soldier has been returned to the Jewish state alive.
Tuesday's operation, which got under way before dawn, will see Israel releasing a first tranche of 477 prisoners, including hundreds who were serving life sentences for deadly attacks.
With all the prisoners in place for the exchange, Israel was waiting for confirmation from either a Red Cross representative or an Egyptian official in Gaza that they had seen Shalit and that he was alive and well.
After receiving confirmation, Israel would then order the release of 27 women prisoners.
The operation got under way before dawn when public radio said 96 prisoners wearing civilian clothes and with their hands and feet manacled had left Ketziot prison in the south en route to Ofer military camp near the West Bank city of Ramallah
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Some 297 prisoners are to be released into Gaza, leaving Israel through Kerem Shalom, then being driven along the border to the Egyptian side of the Rafah crossing where they would be greeted by top Hamas figures from the Damascus-based leadership, including exiled chief Khaled Meshaal.
"We are on the way to Rafah with Mussa Abu Marzuk and Sheikh Salah al-Aruri to welcome the liberated prisoners," spokesman Izzat al-Rishq told Hamas's Al Aqsa television in Gaza, referring to Meshaal's deputy and another senior Hamas official.
"The operation to return Shalit to the Israeli side will take place at the moment we are assured that all the prisoners have arrived at the Egyptian border."
Another 40 prisoners who are to be deported overseas will remain in Egypt before being sent to host countries, which include Turkey, Syria and Qatar.
An AFP correspondent in Kerem Shalom saw the final two coachloads of prisoners arriving at the crossing, escorted by two prison service vans.
There was a very heavy security presence on the roads around the crossing and Ketziot prison, which lies some 50 kilometres (30 miles) further south, AFP correspondents said.
Emotions were running high across Israel, where Shalit, held for over five years, has enormous symbolic importance.
And Palestinian across the West Bank and Gaza were also preparing to give a heroes' welcome to the returning prisoners.
Shalit was a 19-year-old corporal on duty along the Gaza border when he was captured on June 25 2006 by militants from three Gaza-based groups, including Hamas.
Three days after he was snatched, Israel launched a massive military operation against Gaza in a bid to secure his release, which lasted five months and left more than 400 Palestinians dead.
Shalit will briefly enter the Sinai before entering Israel after which he will be flown to Tel Nof airbase in southern Israel where he will meet with his family and meet Israele's leaders.
Shalit's family, his parents Noam and Aviva, his brother Yoel and sister Hadass, left their home in Mitzpe Hila in northern Israel and were taken by helicopter to Tel Nof airbase near Tel Aviv where they were to be reunited with the now 25-year-old soldier, an AFP correspondent said.
Late on Monday, the Israeli Supreme Court rejected an 11th hour appeal against the swap by families who had lost people in Palestinian attacks.
In all, Israel will free 1,027 Palestinians, with a second of 550 to be released within two months.