Palestinian Prime Minister Salam Fayyad on Sunday welcomed Israel's decision to release close to 200 Palestinian prisoners as a gesture to the Palestinian Authority, but said Israel should release even larger numbers of prisoners.

The cabinet approved the release of the Palestinian prisoners, including two prisoners "with blood on their hands," meaning they were directly involved in the killing of Israelis, during the weekly cabinet meeting Sunday morning.

"We welcome the release of any Palestinian prisoner. It is considered a victory for Palestinians," he told The Associated Press during a tour of the northern village of Tubas. "We ask Israel to change its conditions for releasing prisoners and we ask for the release of all prisoners without exception." One of the Palestinians expected to be freed is said to have dispatched terrorists to carry out an attack while another attempted to carry out an attack of his own.

Nabil Abu Rudeineh, an aide to Palestinian President Mahmoud Abbas, called the move "a step in the right direction" as Israel and the Palestinians pursue a statehood deal by January in U.S.-sponsored talks, but said "thousands, not hundreds" of prisoners should be set free.

A spokesman for Prime Minister Ehud Olmert said the cabinet voted to release the prisoners as a confidence-building measure aimed at bolstering Israeli-Palestinian dialogue and strengthening moderates.

A government official said the release would be carried out around August 25, before the Muslim holy month of Ramadan.

Foreign Minister Tzipi Livni, the leading Kadima candidate to succeed Olmert, said the release demonstrated to the Palestinians that dialogue, not violence, achieved the best results.

Ministers on the right, however, attacked the decision as a deterrent in the ongoing negotiations to release abducted Israel Defense Forces soldier Gilad Shalit, who was seized by Gaza militants in June 2006 and has been held there since.

"The cabinet decision is additional proof that the Kadima-Labor government is subverting ethical and security norms," said opposition leader and Likud Chairman Benjamin Netanyahu.

"Instead of taking a position of attacking terror, the government is freeing terrorists with blood on their hands, in exchange for nothing, while Gilad Shalit continues to rot in jail. The inevitable result is that terror organizations will understand that they can send more terrorists to carry out more attacks in Israel - and they'll know that one day, they too will be freed," Netanyahu added.

A release list has not been finalized but would include long-serving inmates, women and children, and two prisoners involved in attacks on Israelis before the 1993 Oslo peace deal, the official said.

From the Gaza Strip, Hamas spokesman Sami Abu Zuhri called for prisoners from his group to be included in the release. He said freeing only those from Abbas's Fatah faction would be "an attempt to strengthen Palestinian internal divisions."

Palestinian officials said Abbas had requested that the group include Said Atabeh, a member of the Democratic Front for the Liberation of Palestine jailed in 1977 and the longest-serving Palestinian prisoner in Israel.

Israel released 429 Palestinians as a gesture to Abbas after the resumption of peace negotiations in November at a conference in Annapolis, Maryland.

Months of meetings, closely shepherded by U.S. Secretary of State Condoleezza Rice, have produced little visible progress on key issues such as control of Jerusalem and the future of millions of Palestinian refugees.