In the southern city of Sidon, members of the Popular Democratic Party were decorating the central Martyrs Square with pictures of Kantar and hanging banners such as "Freedom to the hero, prisoner Samir Kantar" and "freedom comes with blood not tears."

Hezbollah had offered no sign that Goldwasser and Regev were alive, and the Red Cross was never allowed to see them. Ahead of the vote, Olmert said for the first time that Israel has concluded the two soldiers were killed during the raid or shortly after.

"We know what happened to them," Olmert told the Cabinet, according to comments released by his office. "As far as we know, the soldiers Regev and Goldwasser are not alive."

Goldwasser's wife, Karnit, praised Olmert for pushing for the trade, while still trying to come to terms with his declaration.

"My heart aches. It is very difficult for me. I am very tired, drained inside," she told reporters. "All I want to do is to digest things, try to understand what happened ... to rest a bit ... to have my pain."

Israeli officials said the deal could take place as early as next week. The trade will likely take place in Germany.

Ofer Regev, brother of kidnapped soldier Eldad Regev, said he hadn't given up hope yet.

"Until we see otherwise, we will continue hoping for a miracle to happen to us," he said.