"Israel and the Palestinian Authority have agreed on an amnesty for dozens of wanted activists affiliated with the al-Aqsa Martyrs Brigades, Fatah's military wing in the West Bank," the official said.
The official added that 178 wanted Fatah gunmen, including Zakariya Zubeidi and Kamal Ranam, the al-Aqsa leaders in Ramallah and Nablus, were including in a list finalized between Israeli and Palestinian negotiators.
The Palestinian Authority is pushing Israel to let up on another 206 wanted Fatah men in an effort to bolster Fatah in the West Bank after its defeat on the hands of Hamas in the Gaza Strip.
Palestinian officials said Israel rejected the 206-name list over 28 men the Jewish State believed had blood on their hands.
Israeli and Palestinian security officials will meet on Monday to discuss the list, the official said.
Palestinian negotiators pledged that pardoned Fatah gunmen would not engage in terror activities and would be disarmed after Israel threatened to hunt those who engage in plotting terror attacks.
Israel also said it would continue its crackdown on the Islamic Jihad, Hamas and the Popular Resistance Committees.