Officials in the West Bank city of Ramallah said that the main contingent of freed prisoners entered the city aboard a fleet of buses at around 10:00 pm (2000 GMT), where thousands of well-wishers awaited them at the Palestinian presidential headquarters.
A small group of 41 crossed at about the same time into the Gaza Strip, an AFP photographer said.
An Israeli prison official said that another two were taken to the border with neighbouring Jordan and two more released at Atarot, in Israeli-annexed east Jerusalem.
On of the Jerusalem residents freed was Salah Hamuri, a French-Palestinian who was convicted of plotting to assassinate a Jewish religious leader and had been due to complete his seven-year sentence in March.
Among the 550 were six women and 55 minors aged 14-17, according to UN child agency Unicef, which welcomed the youngsters' release.
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