A US student being held as an Israeli spy in Egypt is expected to walk free in the coming days after Israel agreed to a prisoner swap.

The deal to secure the release of Ilan Grapel was confirmed by Prime Minister Benjamin Netanyahu, who said that 25 Egyptian prisoners, including three minors, would be released early from Israeli jails in return. The exchange was unanimously approved by Israel's security cabinet.

Mr Grapel, 27, has been imprisoned for alleged espionage for Mossad since June, when he was arrested in Cairo. He has not been charged with anything and his family said that he was not a spy but was working for an NGO when he was detained.

The law student has dual US and Israeli citizenship. He grew up in New York but moved to Israel in 2003 and served in the IDF. He was wounded during fighting in the second Lebanon war. Since 2005 he has been studying in the US.

The prisoner swap, if it goes ahead, will be Israel's second this month. Last week Gilad Shalit returned home after more than five years in the captivity of Hamas, with the first half of 1027 Palestinian prisoners being freed in return.

But while the Shalit deal involved the release of prisoners serving life sentences, the Egyptian prisoners who will be freed in return for Mr Grapel are not security prisoners.

The imprisonment of Mr Grapel has been another example of the cooling relationship between Egypt and Israel since the collapse of the Mubarak regime at the height of the Arab Spring.