A broad understanding on releasing prisoners was reached when President Asif Ali Zardari met Prime Minister Manmohan Singh during a private visit to India in April, unnamed officials were quoted as saying by The Express Tribune.
The swap will apply to all prisoners except those detained on charges of terrorism or espionage, sources in the Foreign Ministry told the daily.
The Foreign Ministries of the two countries have been gathering data on prisoners on both sides of the border.
While no exact figure is available, officials said the number of Pakistanis held in Indian jails run into hundreds and most of them are either fishermen or persons who unknowingly crossed into India.
An equal number of Indians are currently in Pakistani jails and are often denied access to a lawyer or contact with their families, the report said.
The release of prisoners will be part of a series of "pleasant developments" between the two countries, the officials said.
"When so many positive things are happening and there is an ambition on both sides to make these gains irreversible, we don't think we should be shying from dealing with this humanitarian issue," said an official at the Foreign Ministry.
On August 15, Pakistan freed 55 Indian fishermen as a goodwill gesture and officials said it was the "informal" beginning of a plan.
There are expectations that an announcement on releasing prisoners might be made in November, when the Indian premier is likely to visit Pakistan.
The two countries resumed their dialogue process last year after a gap of over two years in the wake of the 2008 Mumbai terror attacks that were blamed on the Pakistan-based Lashkar-e-Taiba.
