Mediators have reached a deal to release Palestinian prisoners who were originally set to be freed by Israeli authorities last Saturday, along with the handover of Israeli hostages' bodies by Hamas, an Egyptian source said on Wednesday.

The source, who was briefed on the matter, said the handovers would take place under Egyptian supervision but did not specify the release date.

Al-Nasser Salah al-Deen Brigades, a Gaza-based militant group allied to Hamas, said it will release the body of Israeli hostage Ohad Yahalomi on Thursday.

Ohad's is one of four bodies set to be released by Hamas in the first phase of the Gaza ceasefire deal.

The three-stage ceasefire which came into effect on January 19 is now nearing the end of its first phase. It has largely held despite accusations of violations by both sides.