The family of kidnapped soldier Gilad Shalit received a video showing their son alive and in good health, UAE daily al-Bayan reported on Sunday.
Gilad's father Noam denied that he had been given a recording of his son.
The newspaper also quoted Israel and Palestinian sources as saying that under pressure from Washington the Israeli government has agreed to release Palestinian prisoners of all factions in return for Shalit.
According to the report, during a meeting in Cairo with Egyptian President Hosni Mubarak, Prime Minister Ehud Olmert will announce that his government has agreed to a prisoner exchange deal with the Palestinians.
The newspaper said that Shalit will be whisked to Cairo upon his release where a team of Israeli doctors will be waiting for him.
Israel will free some 1,500 Palestinian prisoners. Some 650 will be release first and 750 will be released two weeks later, while 80 prisoners, including senior Palestinian officials and convicted terrorists serving long sentences, will be released at early next month.
In addition, it was reported that Olmert asked President George W. Bush to strengthen Olmert's government.