JERUSALEM (Reuters) - An Israeli spy serving a life sentence in the United States and groups of Palestinian prisoners could be freed under an emerging deal to salvage Middle East peace talks, sources close to the negotiations said on Monday.

The sources, who spoke as U.S. Secretary of State John Kerry prepared to meet Israeli and Palestinian leaders, said under the proposed arrangement that Jonathan Pollard, a former U.S. Navy analyst caught spying for Israel in the 1980s, could be released by mid-April.

In addition, Israel would go ahead with a promised release of a fourth group of Palestinians, among the 104 it pledged to free in a deal that led to the renewal of peace talks last July. Another group of jailed Palestinians would also go free - and the peace talks would be extended beyond an April 29 deadline, the sources said.

(Reporting by Jeffrey Heller, Editing by Allyn Fisher-Ilan)