Israel was preparing on Tuesday to release 26 long-serving Palestinian prisoners, the second batch of 104 inmates who are to be freed in line with commitments to US-brokered peace talks.

The release, due to take place late at night, will see 21 prisoners going to their homes in the West Bank.

The remaining five are to return to the Hamas-run Gaza Strip.

All 26 were convicted for killing Israelis, with most of the attacks occurring before the 1993 Oslo Accords, which granted the Palestinians limited self-rule but failed to usher in an independent state.

Although Israel is engaged in direct peace talks with the Palestinians -- relaunched in late July after a three-year hiatus -- the move has sparked tensions within Prime Minister Benjamin Netanyahu's coalition.

And Israel has pledged to push through a wave of new settlement tenders in tandem with the release, in a move officials say was coordinated in advance.

"The decision to release the prisoners is one of the most difficult I've had to make," Netanyahu told his right-wing Likud party on Monday.

"It is unjust because these terrorists are being released before completing their sentence. My heart is with the families of the victims."

Defence Minister Moshe Yaalon echoed those sentiments on Tuesday.

"In recent months we have been facing sensitive diplomatic circumstances and weighty strategic considerations which require us to take difficult and painful steps," his office quoted him as saying.

"It is not a black and white situation. It is highly complex and obliges us to be prudent and responsible, to see also the long view. This is a hard day," he said.

Netanyahu agreed to release 104 prisoners in stages as part of the resumption of talks. A first tranche of 26 was freed on August 13.

The talks are held under a US-imposed media blackout but a senior Palestinian official said Tuesday that Israel had adopted hardline positions and negotiations had so far produced "no tangible progress".

"The current Israeli negotiating position is the worst in more than 20 years," Yasser Abed Rabbo, a top official with the Palestine Liberation Organisation, said in a statement.

"They want security first, and that the borders of the state of Palestine should be set out according to Israeli security needs that never end, and that will undermine the possibility of establishing a sovereign Palestinian state."

'Are we crazy'

The prisoners were taken from other facilities to Ofer prison on Monday, where they spent the night ahead of their release, Israel Prisons Service spokeswoman Sivan Weizman told AFP.

She said that the five Gazans were driven on Tuesday evening to a holding area on the Israeli side of the Erez crossing to the strip.

The West Bank prisoners would be taken from Ofer to the nearby Beitunia crossing from where they would travel to Ramallah, she said.

On Monday, around 2,000 Israelis rallied outside Ofer, among them relatives of militants' victims, chanting "Death to terrorists!" and holding placards reading: "Are we crazy? We're releasing murderers."

On Tuesday evening, Israel's Supreme Court turned down a petition by bereaved families against the prisoner release.

Nineteen of the 26 due for release are members of the Fatah party led by Palestinian president Mahmud Abbas, three are members of Hamas, and four are from the leftwing Popular Front for the Liberation of Palestine (PFLP), according to a list released Sunday.

Media reports says Israel plans to announce construction of 1,500 new settler homes in the coming days, up to two-thirds of them in annexed east Jerusalem.

Last week, an Israeli official said new tenders were to be announced in the large settlement blocs and in east Jerusalem "in the coming months" as part of "understandings" reached with both the Palestinians and Washington.

The Palestinians -- who view continued settlement construction as a major obstacle to peace -- flatly denied any such agreement.

In August, Israel announced plans for more than 2,000 new settler homes in tandem with the first prisoner release, angering the Palestinians.