Gilad Shalit could be freed as early as next month after more than five years in captivity if a reported prisoner swap goes ahead.
According to the Al-Arabiya television network Israel and Hamas have agreed on a deal, to take place in November.
Few details have been confirmed but it is believed Egypt has been been involved in the negotiations. Israel Radio reported that the swap would see 1,000 Palestinian prisoners released in return for the soldier being freed.
An Israeli official said that the Prime Minister was meeting with the cabinet to discuss the details of the plan and take a vote on it.
A spokesman for Benjamin Netanyahu’s office said: "A brief window of opportunity has been opened that would possibly lead to Gilad Shalit's homecoming."
The soldier was kidnapped in June 2006 while he was on duty at the Gaza border.
In August, his family marked his 25th birthday, his sixth away from home.
Hamas has refused previous offers of a deal and has repeatedly prevented the Red Cross from gaining access to the soldier.
If the swap does materialise, it would not be the first instance of the Israel government agreeing to free Palestinian prisoners to secure information about Shalit's fate. In 2009, the government said it would free 20 female Palestinian inmates so that Hamas would hand over a two and a half minute video proving he was alive.