The Cabinet approved the deal by 22 votes to three and the handover will take place Wednesday.
Israel is expected to exchange five Lebanese prisoners, including Samir Kantar, the perpetrator of a brutal triple murder, for two of its soldiers captured by Hezbollah in 2006.
Ehud Goldwasser and Eldad Regev's capture sparked the war between Israel and Hezbollah in summer 2006. Hezbollah has not said if the two soldiers are alive or dead, while Israeli Prime Minister Ehud Olmert said last month that they were probably dead, based on a forensic examination of the site where they were captured.
Many government ministers initially opposed the decision to hand over Kantar, who is serving multiple life terms for murdering an Israeli policeman, a civilian and a four year-old child in northern Israel.
