Eilat, Israel ? Egypt on Sunday released an Israeli man convicted of spying in exchange for Israel’s release of six Egyptian students, a deal that signaled a warming of relations between the two countries, officials here said. As part of the deal, Israel may also release Palestinian prisoners in the future, Prime Minister Ariel Sharon said.

Egypt freed Azzam Azzam, an Israeli Arab sentenced in 1997 to 15 years in prison after an Egyptian court convicted him of espionage. At the time, Azzam ran a textile factory in Egypt, and Israel has denied he was an agent. The case against Azzam was based, in part, on allegations he used invisible ink to transmit information.

Israel in turn released six Egyptian students who had sneaked into the country in August and were arrested on suspicion they tried to kidnap Israeli soldiers and commandeer a tank.

The transfer took place at the Taba crossing between Israel and Egypt. After Azzam crossed into Israel in a van, he was taken to a nearby airport at the Red Sea resort of Eilat, apparently for a flight to central Israel.

Israeli security officials who accompanied Azzam said he cried and flashed a victory sign as he emerged from the van.

Azzam was expected to undergo a medical check at a hotel in Eilat before returning to his family in the northern Israeli village of Mughar. He briefly spoke to his wife, Amal, by phone from Eilat.

Azzam Azzam, an Israeli Arab jailed in Egypt since 1996 who was later convicted of spying for Israel, holds one of his sons as he arrives at his village of Mughar in northern Israel. Israel and Egypt reached a deal Sunday to free six Egyptian students, captured sneaking into Israel and jailed since August, in a prisoner swap with Azzam.

“Azzam, I can’t believe it’s you,” his wife told him, looking faint and emotional as the family cheered in the background.

Azzam’s brother, Iftan, said the family only found out earlier Sunday that he was about to be released. “We invite the whole state of Israel to celebrate with us,” Iftan Azzam told Israel Radio.

Israel’s relations with the Palestinians and with Egypt have been steadily improving since the death last month of Palestinian leader Yasser Arafat.