Israel handed over five Lebanese prisoners to Hezbollah via the Red Cross on Wednesday after the Shi'ite guerrilla group returned the bodies of two Israeli soldiers seized in a cross-border raid in 2006.

Among the men who arrived at the border in an International Committee of the Red Cross convoy was Samir Qantar, Israel's longest-serving Lebanese prisoner. Wearing jeans and a grey sweater, he was mobbed by reporters and well-wishers on arrival.

Hezbollah has prepared a triumphal welcome for the five men freed under a deal seen by many Israelis as a painful necessity, two years after the two soldiers' capture sparked a 34-day war that killed about 1,200 people in Lebanon and 159 Israelis.

Israel retrieved the corpses of Ehud Goldwasser and Eldad Regev only after agreeing to release Qantar, who had been serving a life term for the deaths of four Israelis, including a four-year-old girl and her father, in a 1979 Palestinian guerrilla raid on an Israeli town.

The four others are Hezbollah fighters captured in the 2006 conflict. All five were to be flown to Beirut ahead of a huge Hezbollah rally to welcome them in the evening.

President Michel Suleiman, Prime Minister Fouad Siniora and Parliament Speaker Nabih Berri were all expected to greet the former captives at the airport in a show of unity in Lebanon, which marked the occasion with a public holiday.

The ICRC drove the five released men to the headquarters of U.N. peacekeepers at the border village of Naqoura, where Hezbollah earlier handed over two black coffins containing the Israeli soldiers.

The Israeli army later said forensic teams had identified the cadavers as those of its missing men. Hezbollah had never disclosed whether they were alive or dead. It has not been clear how they met their deaths.

"The Israeli side will now hand over the great Arab mujahid (holy warrior) . Samir Qantar and his companions to the ICRC," Hezbollah official Wafik Safa said after delivering the bodies.

The release of the Lebanese prisoners, said by Hezbollah to be the last held in Israel, closes a file that has motivated repeated attempts by Shi'ite guerrillas over the past quarter century to capture Israelis to use as bargaining counters.

The fathers of the two Israeli soldiers spoke of their pain at watching the transfer of their sons' coffins on television.

PAINFUL REALITY

"It is not easy to see this, although there was not much surprise to it. But . confronting this reality was difficult, yes," Shlomo Goldwasser told Israel radio.

Zvi Regev said on Army Radio: "It was a terrible thing to see, really terrible. I was always optimistic, and I hoped all the time that I would meet Eldad and hug him."

Goldwasser's father-in-law, Omri Avni, said of Qantar, who was 17 at the time of the raid: "The despicable murderer who killed the children 30 years ago has gone home, and finally, for the first time in his life has done a good deed by leaving this place and bringing about the return of Ehud and Eldad."

Under the deal, mediated by a U.N.-appointed German intelligence officer, Israel also handed over the bodies of eight Hezbollah fighters slain in the 2006 war, and those of four Palestinians, including Dalal Mughrabi, a woman guerrilla who led a 1978 raid on Israel.

The four were among the nearly 200 Arabs killed trying to attack Israel whose bodies are to be sent to Lebanon. Hezbollah returned the remains of other Israeli soldiers killed in the south.

Israel is also to free scores of Palestinian prisoners at a later date as a gesture to U.N. Secretary-General Ban Ki-moon.

Hezbollah has dubbed the exchange "Operation Radwan", in honour of "Hajj Radwan", or Imad Moughniyah, the group's military commander who was assassinated in Syria in February.

Yellow Hezbollah flags fluttered across south Lebanon and on the coastal highway from Naqoura to Beirut. "Liberation of the captives: a new dawn for Lebanon and Palestine," a banner read.

Israel denounced the planned festivities.

"Samir Qantar is a brutal murderer of children and anybody celebrating him as a hero is trampling on basic human decency," said Israeli Prime Minister Ehud Olmert's spokesman Mark Regev.

For some Lebanese, the swap showed the futility of the conflict with Israel two summers ago. "There shouldn't have been a war in 2006. A lot of lives were lost," said Rami Nasereddine, 18, lamenting Israel's refusal to trade captives at the time.

The European Union hailed the prisoner deal as a positive step by both sides that would contribute to regional stability.

The Palestinian Islamist group Hamas said the swap strengthened its own hand in demanding freedom for hundreds of prisoners in exchange for captured Israeli soldier Gilad Shalit.

Palestinian President Mahmoud Abbas offered congratulations to Qantar's family, the Palestinian news agency WAFA reported.