First talks in five years get under way as Israel releases 26 Palestinian prisoners

Israeli and Palestinian negotiators met in Jerusalem last night for the first substantive talks for five years amid scepticism and hope that the two adversaries could reach a deal to end their conflict within nine months.

The negotiations, brokered by the US after months of intensive shuttle diplomacy, opened at an undisclosed location less than 24 hours after Israel released 26 long-term Palestinian prisoners in a move that brought joy to the detainees' families but anguish to relatives of their victims.

A series of moves by Israel over recent days to step up construction in its settlements in the West Bank and East Jerusalem added to a potent mix of blame, bluster and suspicion surrounding the talks.

US secretary of state John Kerry, who has doggedly driven the two parties back to the negotiating table, telephoned both sides on Tuesday evening to shore up their commitment to resuming the long-moribund peace process. "The atmosphere is not positive," said one western diplomat, reflecting the consensus view among observers. "This is politically very tough."

State department officials said the talks would take place out of the public eye, and statements on their progress were unlikely. The venue of meetings will shift between west Jerusalem and the West Bank city of Jericho in the coming days.

In an unexpected move, Israel reportedly agreed to hand over dozens of bodies of Palestinian militants buried in Israeli cemeteries as part of a package of measures to encourage peace talks. Despite securing the release of a total 104 prisoners in stages over the next nine months, Palestinian leaders reacted furiously to a series of Israeli statements about new settlement construction in recent days. Settlements, borders and the territory of a future Palestinian state are the top priority for Palestinian negotiators.

Senior Palestinian official Yasser Abed Rabbo warned that the talks could collapse. "Settlement expansion goes against the US administration's pledges and threatens to cause the negotiations' collapse," he said. "It threatens to make talks fail even before they've started."

Israel announced on Tuesday that more than 900 new homes would be built in Gilo, a settlement across the pre-1967 Green Line in Jerusalem. On Sunday it approved 1,200 new housing units in settlements in the West Bank and East Jerusalem. All settlements in the West Bank and East Jerusalem are illegal under international law.

Kerry said the settlement plans were "to some degree expected", adding: "We have known that there was going to be a continuation of some building in certain places and I think the Palestinians understand that."

The freed prisoners were greeted by thousands of Palestinians in the West Bank and Gaza early Wednesday. President Mahmoud Abbas met each of the 11 men who returned to the West Bank with a handshake and a kiss on each cheek outside the presidential compound in Ramallah.

"We congratulate ourselves and our families for our brothers who left the darkness of the prisons for the light of the sun of freedom. We say to them and to you that the remainder are on their way, these are just the first," Abbas told the crowd.

After the welcome ceremony the prisoners left for homes that most had not seen for more than 20 years.

All the men in the first group to be released had been convicted of murder or accessory to murder. Many of their victims' relatives had opposed the release in anguished protests and vigils in Israel, saying the price of re-entering peace negotiations was too high.

A last-minute petition by family members to halt the release was rejected by Israel's high court on Tuesday. "Our hearts are with the bereaved families, whose pain is immense," chief justice Asher Grunis wrote in the court's decision. "But we are certain that the authorised officials made their decision with a heavy heart, taking the families' position into account."

Hamas welcomed the release of prisoners but insisted Palestinian liberation would come through resistance rather than negotiations. "The path to freedom is the path of victories and sacrifices, not concessions of the Palestinian people's principles, rights and honour," Mahmoud Zahar told reporters on Sunday.

Among the prisoners released to the West Bank were cousins Mohammed and Hosni Sawalha, who were teenagers when they boarded an Israeli bus in 1990 and attacked its passengers with knives, killing one and injuring several more. After 23 years in jail they returned home as men on the cusp of middle age, greeted by flags, bunting, fireworks and more than 40 nephews and nieces they had never met.

In the small village of Azmout, in the northern West Bank, calves and lambs had been slaughtered for a celebration expected to last at least two weeks. Mohammed Sawalha's parents, now in their 70s, had dressed in their finest clothes to meet their son; Hosni Sawalha's parents died while he was in prison. Around 100 villagers went to Ramallah to greet the released men.

"Even though I am an old woman, I will jump for joy when I see him," said Aziya Sawalha, as a stream of visitors arrived at the family home in the hours before the release to offer congratulations and accept sweets and soft drinks. Gesturing to her traditional white robe, she added: "This is more important than a wedding."

But Gila Molcho, whose brother, Ian Feinberg, was killed in Gaza in 1993 in a gruesome attack by a guard of the building in which he worked as a lawyer on an EU-funded aid project, opposed the prisoner release .

"I think of my brother every morning when I wake up," said Molcho. "He was slaughtered days after his 30th birthday and left behind three beautiful children."

The Palestinians' insistence on the prisoners' release before returning to talks was wrong, she added. "Their first demand is to let out murderers who are idolised by children – how is that going to help peace? I want peace but I do not want to pay this price as a gesture."