The PLO insisted only the immediate release of thousands of prisoners would calm a population enraged by the massacre in which an estimated 43 people were killed. Palestinian officials also demand all 120,000 settlers in the occupied territories be disarmed.
"This step is less than what is expected because most of the prisoners were going to end their jail terms within a few weeks," official Yasser Abed-Rabbo said in Tunis.
He said the PLO was due to present the United States with a list of its demands for resuming the talks, including the removal of some settlements like Kiryat Araba, where Jewish settler Baruch Goldstein, who killed the worshippers, was buried.
Sabri Jamil al-Barbarawi, one of about 30 prisoners of PLO head Yasser Arafat's Fatah group who returned to Hebron at midday, said Israel should release all prisoners of all factions.
"Personally I am happy but at the same time I am sad for being released at these sad and difficult times that my people are passing through," he said.
A government spokesman said Israel has been considering for some time a prisoner release, its third since signing peace with the PLO last year, but brought it forward after the massacre.
Israel also announced it would pay compensation to the wounded and families of those killed in the mosque massacre, but said they would get less than Jewish victims of Arab violence. Some $1,700 will be paid as an advance and the final sum will depend on the size of the victim's family.
Meanwhile, clashes broke out for a fourth day all over the occupied territories. Israeli troops shot and wounded at least 16 Palestinians as clashes erupted all over the occupied territories for the fourth day running.
In Hebron, three Palestinians were shot. In the northern West Bank town of Nablus, hundreds of youths poured into the streets as soon as the curfew was partially lifted. Eight were hit by rubber bullets.
In the Gaza Strip, Palestinian sources said there were sporadic clashes all day. Five stone-throwers were shot and wounded in the southern Gaza town of Rafah.
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