The release, due to take place late at night, will see 21 prisoners going to their homes in the West Bank and the remaining five returning to the Hamas-run Gaza Strip.
All were convicted for killing Israelis, with most of the attacks occurring before the 1993 Oslo Accords, which granted the Palestinians limited self-rule but failed to bring about an independent state.
Although Israel is currently engaged in direct peace talks with the Palestinians -- relaunched in late July after a three-year hiatus -- the move has sparked tensions within Prime Minister Benjamin Netanyahu's coalition.
"The decision to release the prisoners is one of the most difficult I've had to make," Netanyahu told his rightwing Likud party on Monday in remarks broadcast on public radio.
"It is unjust because these terrorists are being released before completing their sentence. My heart is with the families of the victims."
Netanyahu agreed to release a total of 104 Palestinian prisoners in stages as part of the resumption of talks aimed at resolving the decades-old conflict.
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