The German Der Spiegel magazine said Monday that Hezbollah has approved a two-staged proposal brokered by German mediator Gerhard Konrad, which entails exchanging the remaining five Lebanese prisoners in Israeli jails in return for two soldiers captured two years ago in a cross-border operation.

The two soldiers, Eldad Regev and Ehud Goldwasser, are believed to be dead. Their capture triggered a 34-day deadly war.

The report in the German magazine said that Hezbollah agreed to the proposed deal, which also entails Israel handing over the bodies of 10 Hezbollah fighters and maps of mines planted by the Israeli army in southern Lebanon.

In return, Hezbollah will also release additional information on Ron Arad, an Israeli airman whose whereabouts remain unknown since he was captured in 1986 after his plane was shot down over Lebanon.

It added that the second stage of the deal involves Israel releasing dozens of Palestinian prisoners, a demand that Israel has so far refused, and which Hezbollah may have abandoned.

Western diplomats said the Germans are now waiting for an Israeli approval of the proposal and hoped that Hezbollah's handing over of the body parts of Israeli soldiers killed in the last war would encourage Tel Aviv to accept it.

As Israel on Sunday released and deported to Lebanon convicted Hezbollah spy Nessim Nisr after completing his six-year sentence, the Shiite organization handed over a box of body parts it said belonged to Israeli soldiers left on the battlefields during the 2006 war.

Israeli officials and sources close to Hezbollah said the move was not part of a swap deal and was a "goodwill gesture" to reach an agreement on a larger deal that would ensure the release of the five Lebanese prisoners, including Samir Kuntar, the longest-serving Arab prisoner in Israel.

In previous swaps, Israel has refused to free Kuntar, who was sentenced to 542 years in 1980 for killing an Israeli man and his four-year-old daughter, as well as two policemen, in a 1979 attack in the Israeli coastal town of Nahariya.

German Foreign Minister Frank-Walter Steinmeier welcomed Hezbollah's unilateral release of the soldiers' remains, saying he hoped "this is a step in the direction of a prisoner exchange," adding that "this creates a positive dynamic, building mutual trust" between the two enemies.

Hezbollah would not acknowledge that its gesture may have been in response to the handing over of Nisr, although it handed over the remains simultaneously as the prisoner was crossing over Lebanon's southern borders on Sunday, where Hezbollah gave him a hero's welcome.

Nisr, of a Shiite Lebanese father and a Jewish mother who converted to Islam, left Lebanon during the 1982 Israeli invasion and joined his mother's family near Tel Aviv. He held an Israeli citizenship at the time of his arrest in 2002.

Arab Commentators say that Nisr's deportation, or repatriation, to Lebanon was also a useful way for Israel to deal with the man after his prison term ended.

They suggest that Hezbollah's gesture may have been an attempt to regain its credibility and improve its image as an efficient anti-Israeli resistance movement after coming under sharp criticism at home and in the Arab world during last month's internal fighting in Lebanon.

The sudden release of the body parts, some analysts argue, was to prove Hezbollah chief Hassan Nasrallah right, five months after he said in a speech that his group was holding "heads" and "body parts" of Israeli soldiers the army had abandoned on the battlefields, which the Israelis had denied.

"We have the heads, the hands, the feet and even a nearly intact cadaver from the head down to the pelvis," Nasrallah said in January. "The Israeli army left behind the remains of the bodies of a large number of soldiers."

Israeli reports on Monday said that DNA tests on the flesh tissue and bones had identified three Israeli soldiers.

Sunday's gesture may also indicate Hezbollah's eagerness to conclude a deal that would finally bring home the remaining Lebanese prisoners.

Nasrallah promised his supporters last week that all the Lebanese detainees in Israel would be released "very soon."