Israeli Prime Minister Ehud Olmert won his cabinet's approval on Sunday for a prisoner swap with Hezbollah under which two soldiers held by the Lebanese guerrilla group, and believed to be dead, would be recovered.

The seizure of army reservists Ehud Goldwasser and Eldad Regev in a July 2006 border ambush triggered a month-long war in Lebanon, with Olmert ruling out talks on their return. He then relented, negotiating through a U.N.-appointed German mediator.

Political sources said that a majority of ministers convened at the weekly cabinet meeting approved a swap under which Israel would free five jailed Lebanese guerrillas, and repatriate the remains of around 10 slain infiltrators, for the soldiers.

"This is a matter of the highest moral order," Olmert said in a broadcast statement before the debate. He said he had "vacillated deeply" over the deal after hearing arguments Israel should return only bodies to Hezbollah if its troops were dead.

In Beirut, a Lebanese political source said the deal could take place "within a few days".

Topping the Israeli release roster is Samir Qantar, who is serving a life sentence for a 1979 raid and whom the Olmert government previously described as the last "bargaining chip" for the return of missing air force navigator Ron Arad.

Hezbollah has said little about the indirect talks.

FROM WAR TO TALKS

Bloodstains and blast damage at the scene of the Hezbollah raid in which Goldwasser and Regev were taken to Lebanon prompted Israeli officials to conclude that one or both of the captives did not survive. Eight other troops died outright.

Hezbollah has given no details on the captives' condition.

Olmert at first ruled out any negotiations for the captured reservists, launching a 34-day offensive in Lebanon. That war

Israeli Transport Minister Shaul Mofaz, a former defence chief, invoked a precept that soldiers be recovered from the battlefield, whether alive or dead: "If the state of Israel does not look out for its sons, its sons will not look out for it."

Arad disappeared into captivity after bailing out during a 1986 bombing run in Lebanon. Hezbollah has denied having knowledge on his whereabouts. Clemency for Qantar would be seen as an Israeli admission that the airman's trail has gone cold.

Olmert deputy Haim Ramon said Israel faced a choice between the "certainty and reasonable price" of a swap for Goldwasser and Regev, and the ongoing uncertainly over Arad's fate.

"Under such circumstances, I think there is no avoiding a decision in favour of the trade," Ramon told Israel Radio, adding that the deal included a requirement that Hezbollah file a report on its efforts to come up with information on Arad.

In parallel to the Hezbollah talks, the Olmert government is trying, via Egypt, to recover a soldier held by Hamas in Gaza.

The Lebanon war, which ended under an August 14, 2006 truce, killed more than 1,200 people in Lebanon and 157 Israelis.