Tel Aviv: US Secretary of State Condoleezza Rice returned to the Middle East on Monday with hopes to reach a Palestinian-Israeli peace deal this year.

Rice landed in Israel for a 25-hour visit that will include talks with Palestinian President Mahmoud Abbas and Israeli Prime Minister Ehud Olmert.

Rice is scheduled to meet senior Palestinian and Israeli officials on Monday ahead of talks on Tuesday with Abbas and Olmert.

"We continue to have the same goal which is to reach agreement by the end of the year," Rice told reporters on the plane from Washington to Tel Aviv.

Rice was also scheduled to hold three-way talks with Israeli Foreign Minister Tzipi Livni and former Palestinian prime minister Ahmed Qorei.

Hours before Rice began her visit, Israel freed 198 Palestinian prisoners, saying it hoped the move would help bolster peace efforts.

Rice described the release as a "very good step". "This is something that matters a lot to the Palestinians ... and it obviously is a sign of goodwill," she said.