Israel and Turkey have reached a preliminary agreement to normalize relations, including the return of one another’s ambassadors to both countries, an Israeli official said Thursday. The deal comes five years after relations reached a low point for the two countries over a deadly Israeli raid on a ship carrying Turkish activists attempting to break Israel's blockade on Gaza.

The deal was reached during a recent meeting in Switzerland between Turkish Foreign Ministry Undersecretary Feridun Sinirlioglu and the incoming head of Israel's Mossad intelligence agency, Yossi Cohen, as well as Israeli envoy Joseph Ciechanover, the official said, speaking on condition of anonymity.

A spokesman for Israeli Prime Minister Benjamin Netanyahu declined comment, and there was no immediate comment from the Turkish Foreign Ministry.

A U.S. official familiar with the agreement confirmed the details. He also spoke on condition of anonymity because he wasn't allowed to talk to the media about the subject.

Under the preliminary agreement, Israel will establish a compensation fund of $20 million to address the killing by Israeli marines of 10 Turks aboard the Mavi Marmara, a ship carrying Palestine-solidarity activists attempting to break Israel's blockade of the Gaza Strip in 2010, the official said. In return, Turkey will drop all legal claims against Israel over the incident.

The once-strong Israel-Turkey alliance has soured dramatically over the past 10 years under former primer minister and current Turkish president Recep Tayyip Erdogan, who heads the AK Party. Relations reached a low with the raid on the Gaza-bound ship.

Efforts at reconciliation, including a 2013 phone call between Erdogan and Netanyahu that was brokered by U.S. President Barack Obama, have yet to yield a final deal restoring full diplomatic ties.

With recent tensions between Turkey and Russia, Israeli officials say Ankara has expressed new interest in importing natural gas from Israel.

According to the agreement reached in Switzerland, the unnamed Israeli official said, the countries will discuss the possibility of constructing a pipeline to supply Turkey with gas from Israel's offshore fields.

Turkey will also expel Saleh al-Aruri, a senior member of Hamas' Al-Qassam Brigade, Israeli newspaper Haaretz reported.

Earlier this week, Erdogan had signaled a possible warming of relations with Israel, saying in published comments that the entire region would benefit from the normalization of ties.

Al Jazeera and wire services