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Israel frees Palestinian prisoners ahead of talks =(PICTURE+VIDEO+VIDEOGRAPHICS+GRAPHIC)= RAMALLAH, Palestinian Territories, Aug 13, 2013 (AFP) - Israel freed 26 Palestinian prisoners on Wednesday, hours before the two sides were to hold new direct peace talks amid a growing row over settlements.

A group of 15 crossed into the Gaza Strip at about 1:40 am (2240 GMT) and were mobbed by relatives as they got out of a bus next to the border.

At about the same time another 11 prisoners arrived in the West Bank city of Ramallah to a welcome from Palestinian president Mahmud Abbas and thousands of cheering, dancing supporters.

"This is the first group," Abbas told the crowd at an official welcoming ceremony at his Muqataa headquarters compound.

"We shall continue until we free all the prisoners from Israeli jails," he said.

The 26 were the first batch of some 104 long-term detainees who are to be freed in stages as part of a US-brokered deal which brought Israel and the Palestinians back to the negotiating table on July 30 for the first time in nearly three years.

But Wednesday's talks are likely to be overshadowed by Israel's advancement of plans to build thousands of new homes for Jewish settlers on lands the Palestinians want for a future state.

The prisoner release has been billed as a confidence-building gesture ahead of the meeting of negotiators in Jerusalem which was expected to take place at the King David Hotel in the presence of US mediator Martin Indyk.

But tempers were fraying on Tuesday after Israel approved construction of nearly 1,000 new settler homes in annexed east Jerusalem, sparking Palestinian allegations that they were aimed at torpedoing the fledgling talks.

Yasser Abed Rabbo, a senior official in the Palestine Liberation Organisation, said that the announcement, coupled with the weekend approval of nearly 1,200 homes in east Jerusalem and elsewhere in the West Bank, threatened to bring about the "collapse" of the talks.

"This settlement expansion is unprecedented," he said. "It threatens to make talks fail even before they've started." Jerusalem city council said the approval for the construction of 942 new homes in the city's eastern Arab sector had been granted on Monday but had been in the works for years.

Two days earlier, Israel's housing ministry announced tenders for the construction of 793 settlement housing units in annexed east Jerusalem and 394 elsewhere in the West Bank.

In a bid to defuse the crisis, US Secretary of State John Kerry, whose dogged shuttle diplomacy brought about a first round of talks in Washington two weeks ago, phoned Abbas late on Tuesday, a senior source told AFP.

"The call Abbas received tonight from Kerry is part of ongoing US efforts to defuse a crisis before the talks (begin), as a result of the new settlement tenders today and in the last few days," he said, speaking on condition of anonymity.

"We are waiting for the United States to take a clear stance on the escalating settlement building, which we consider the biggest obstacle that Israel is creating to stop serious talks from happening." Abbas's office also confirmed he had received a phone call from Kerry "to discuss developments in the peace process, on the eve of the resumption of negotiations".

Israel and the Palestinians last held direct negotiations in September 2010 but the talks collapsed several weeks later following a row over Israel's settlement building.

Last week, Washington announced the two sides would hold their next meeting on August 14 in Jerusalem, but so far, Israeli and Palestinian officials have remained tight-lipped over the time of the meeting.