For a third time in two weeks, Israeli negotiator Ofer Dekel returned to Cairo on Tuesday night in an effort to nail down an elusive deal, that could pave the way for a long-term truce for the Gaza Strip.
"Intensive and tough negotiations are underway on the names of the Hamas prisoners to be traded for Shalit," a source close to the talks told AFP, asking not to be named.
Dekel "is now expected to spend a second night in Egypt and will pursue talks, in an apparent sign that things are moving," the source said later on Wednesday.
He said the two sides were in a race against the clock to seal a deal before an April 3 time-limit for Prime Minister-designate Benjamin Netanyahu to form a new government.
"There are some names of terrorists (on the list) whose release would be unacceptable for Israeli public opinion," said the source close to the talks. "The question is whether Hamas is flexible enough to remove such names."
He said Cairo was preparing a two-stage release: about 300 Palestinians would walk free in return for Shalit's transfer to Egypt, and he would return home once the rest are released.
Dekel is locked in talks with Egypt's Intelligence Chief General Omar Suleiman, who has been working to mediate a deal in the absence of direct talks between Hamas and Israel.
The latest prisoner swap efforts coincide with a visit to Cairo by Mussa Abu Marzuk, the deputy head of Hamas' politburo, for the inter-Palestinian talks.
"I don't have information on Shalit. I don't even know if he is alive or not," the Damascus-based Abu Marzuk told an Arab newspaper. "Only the factions holding him know, and such information comes at a price."
He said 450 convicted Palestinians were up for release as well as 550 other detainees: youths, women and Hamas political figures.