Unusually, among those released were two men accused by the Israelis of having "blood on their hands", Said al-Atabeh, the longest serving inmate in custody, and Mohammed Abu Ali, the second longest serving, who had been elected as a Fatah MP while behind bars.
Although the Israeli government has carried out prisoner releases in the past, it had taken a hard line on those, like al-Atabeh and Abu Ali, who have been convicted of killing Israeli citizens. However, today's gesture was described by officials as a "confidence building move", an attempt to bolster the position of the Fatah leader Mahmoud Abbas.
The Bush administration wants a deal concluded between the Israelis and Palestinians by the end of the year, but that seems increasingly unlikely with George Bush about to leave office, Israeli premier Ehud Olmert due to step down with the prospect of facing criminal charges for alleged corruption and Mr Abbas under intense pressure among rank and file Palestinians from Hamas.
Ms Rice, who broke off from dealing with the ongoing crisis in Georgia to visit Israel and Palestine, is expected to urge greater flexibility in talks with officials from both sides. But the general feeling among the Israelis and Palestinians is one of pessimism.
Several members of the Israeli cabinet, and many among members of the public, had opposed freeing Palestinians convicted of violence against Israeli citizens, but a ministerial committee approved the list a week ago.
In Ramallah, among the music and dancing to welcome the homecoming prisoners, the overall message was that it changes nothing much. Atabeh, who had been convicted of bombings which killed an Israeli woman and injured around a dozen others in 1977 said: "This is a great joy for our mothers and our people, but it remains a small step because we left behind thousands of prisoners, we cannot rest until they, too, are freed."
Israel holds around 9,000 prisoners, and Palestinians complained that further arrests were being carried out even as the prisoner release was being announced.
Ratib Jabbar, 51, who was waiting for his 26 year old son Amjad who was being freed after serving two and half years of a nine year sentence following a shoot-out with Israeli forces, said "Of course I am very glad that he is coming home and I now want him to get a job, get married and settle down. But the Israelis were in Ramallah again last night, they broke down doors and took away some people. So even when people are coming out of jails, others are taking their place."
Another of Mr Jabbar's sons, 16 year old Mohammad Adem, was killed nine months ago. "He was throwing stones and they shot him", he said. "Of course I grieve as father to lose such a son. It would be more bearable if there was some chance of peace, but I do not think that is going to happen."
Abu Ali was jailed in 1980 for killing an Israeli settler in the West Bank and later for killing a fellow Palestinian inmate accused of being a collaborator. His wife Suad, 51, who had arrived to greet him with their two sons and a daughter, said "When Mohammed was arrested I was 22 years old, my children were babies. Today I feel I am reborn, our family's life is just beginning."
Iman Hirzullah stood by herself a little further away from a group of ululating women welcoming back relations. The name of her son, 20 year old Nabil Bani Nimreh, was not in the list of those due to be freed.
"He has been there now for three years and I have only been allowed to see him twice", she said. "Men he shares the cell with are being let out, but not him. I am sad, but we are used out men being taken away, my husband was imprisoned three times under administrative orders, six months each time.
"I blame the Arabs for what is happening. They should either make peace with Israel under just terms, or fight them. They are too disunited to do either."
The prisoners were brought to the Beituniya checkpoint near Ramallah from Ofer prison in Israeli vehicles, through cheering crowds.
Addressing a crowd of several thousand, Mr Abbas said: "There is no doubt that we seek peace and we are trying to seek our goals - and there won't be peace without the release of all prisoners".
Mark Regev, spokesman for the Israeli prime minister's office said: "It's not easy for Israel to release prisoners". But, he added: "We believe this action can support the negotiation process and create goodwill."
After returning to his home in Ramallah and an emotional reunion with his family, Amjad Jabbar, went to the graveside of his 16 year old brother. "We believe in what we are fighting for", he said. " But so many young people are being lost. Most people would like peace, but there must be justice as well."
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