“The release of 405 prisoners has begun in prisons managed by the prison services, as well as army detention camps,” said prison services spokeswoman Orit Stetzer.
The prisoners are being released at four drop-off points across the West Bank and at the Erez Crossing between Israel and Gaza.
Palestinian officials dismissed the release as a public relations stunt and say Mr Abbas needs more releases of prisoners to preserve a shaky ceasefire deal with militants.
None of the prisoners scheduled for release had been convicted of attacks that killed or injured Israelis. Many were in jail for allegedly belonging to militant groups, possessing weapons or plotting attacks.
The first lot of 500 prisoners were released in February, however the process was halted when five Israelis were killed in a February 25 Palestinian suicide attack in Tel Aviv.
Israeli Prime Minister Ariel Sharon has said the 900 prisoners are all “without blood on their hands” or were detained for being involved in anti-Israeli attacks.
The release comes after appeals from various extreme right groups protesting the releases were thrown out by Israel’s supreme court.
Mr Sharon said the action would “strengthen the moderate elements within the Palestinian Authority”, after Israeli ministers approved the move by majority vote on Sunday.
The releases come after Mr Sharon announced he will hold a second summit with Palestinian President Mahmoud Abbas on June 21, in an effort to boost the stalled peace process before Israel’s planned withdrawal from Gaza.
The two leaders last met on February 8 in the Egyptian resort of Sharm el-Sheikh, where they called a halt to four-and-a-half years of fighting, in a deal that has drastically cut violence in the region.
Chief Palestinian negotiator Saeb Erekat confirmed the date for talks.
He said Mr Abbas hoped to shore up the truce with Israel and to discuss using Israel’s Gaza pullout in August as a springboard for new peace talks under a US-backed road map plan.
“On the agenda is sustaining the ceasefire,” Mr Erekat said. “We will exert every possible effort to ensure the summit is successful.”
Previous obstacles to talks have been Israeli complaints that Mr Abbas has failed to disarm militants, and Palestinian demands for Israeli troops to withdraw from more West Bank towns.
Israeli officials said Mr Sharon would try to persuade Mr Abbas to drop talks with Hamas, an Islamic that has gained political influence through recent victories in local elections.
Meanwhile Israeli security officials on Wednesday said they had arrested a group of Islamic Jihad militants hours before they planned to carry out twin suicide bomb attacks in Jerusalem.