Hamas leaders vowed to secure the release of all remaining Palestinian prisoners in Israeli jails, as jubilant crowds in Gaza and the West Bank greeted the return of hundreds freed in exchange for Israeli soldier Gilad Shalit.

Hamas shaped Tuesday's massive celebrations in Gaza as a victory parade for the militant Islamist movement, saying the exchange should give hope to 5,000 Palestinians still behind bars.

"Negotiation based on power forces the enemy to pay the price," said Syrian-based Hamas leader Khaled Mashaal in a speech broadcast to the celebrations from Cairo. "We defeated the Israelis."

Hamas officials declared Tuesday a national holiday, while an estimated 200,000 people gathered to greet the released prisoners and chant, "The people want a new Gilad."

But the prisoner exchange may have also shown a side of Hamas that is more pragmatic than Tuesday's rhetoric suggests, said Costanza Musu, a professor at the University of Ottawa's graduate school of public and international affairs.

"In a way this is also a side of Hamas that is less ideological and more inclined to negotiate with Israel on specific issues," Musu told CBC News.

"What Hamas is trying to do is gain traction with the whole Palestinian population, not just in Gaza."

Tuesday's celebrations in Gaza marked one of the largest gatherings since Hamas captured the territory from forces loyal to Palestinian President Mahmoud Abbas's Fatah movement in 2007.

As part of the agreement between Israel and Hamas, the rest of the prisoners — about 550 more — are to be released in a second phase at a later date.

In the Fatah-controlled West Bank, men in Ramallah hoisted freed prisoners on their shoulders and carried them through streets as heroes, the CBC's Derek Stoffel reported.

The released prisoners were taken to the grave of iconic Palestinian leader Yasser Arafat. Palestinian President Mahmoud Abbas greeted them, and several thousand people filled the courtyard outside his headquarters to celebrate.

In a rare moment, Abbas shared the same podium with senior Hamas official Hassan Youssef.

"To your families, to your brothers, to your country after this forced distance, that was enforced on you because you are freedom fighters for the sake of God and country," Abbas told the returning prisoners.

Power struggle

Israel refuses to participate in direct peace talks with Hamas, which continues to refuse to renounce its founding charter's calls for Israel's destruction. Since Israel and Hamas will not talk directly to each other, the exchange had to be negotiated through Egyptian mediators.

The exchange has prompted questions over what influence it might have on fledgling Palestinian attempts at ending the bitter power struggle between Fatah and Hamas, as well as on the West Bank-based Palestinian Authority's bid for UN recognition of a Palestinian state.

Huzam Zomlot, a deputy of Fatah's foreign relations department, called Tuesday a "moment of national pride" for all Palestinians and suggested it could give leaders a unique opportunity to reunite in a coalition government.

"It's a moment of hope because people both in Israel and Palestine now have to realize that freedom is the way forward, that recognizing and realizing people's grievances is the best insurance policy for the future," Zomlot told CBC News in an interview from Ramallah.

While Abbas and Fatah were hailed as heroes upon their return from the United Nations in September, it is widely believed the prisoner swap bolsters Hamas's push for primacy in Gaza, as well as improving its standing among Palestinians in the Fatah-controlled West Bank.

Despite Israeli and U.S. opposition to the unilateral UN bid, Abbas has largely struggled in the past at home with the perception that he receives too much support from the West.

Zomlot questioned the timing of Israeli Prime Minister Benjamin Netanyahu agreeing to make the deal, insisting Abbas had secured a similar agreement with past Israeli administrations that were never implemented.

While acknowledging Netanyahu was under considerable pressure domestically to secure a deal for Shalit's release, Zomlot accused the Israeli leader of using the swap to "derail" any momentum Abbas had generated with his bid at the UN.

But the University of Ottawa's Musu said that while undermining Abbas can have its advantages politically for Israel, it also brings a risk of isolating a moderate leader who has chosen a course of international diplomacy over armed struggle.

"If you reduce the political space for Abbas, who's going to fill it up? Probably Hamas," she said.

In an address Tuesday, Netanyahu defended the prisoner swap, and called his effort to secure the release of Shalit "one of the principal and most complicated missions" his government faced. He also said Israel is "different from its enemies" because it does not "celebrate the release of murderers."

"Here, we do not applaud those who took life," he said.

"It is difficult to see the miscreants who murdered their loved ones being released before serving out their full sentences. But I also knew that in the current diplomatic circumstances, this was the best agreement we could achieve, and there was no guarantee that the conditions which enabled it to be achieved would hold in the future."

But the biggest political gain for Netanyahu from the deal could come not at home, but abroad, while peace negotiations remain stalled and Israel faces international criticism for continuing construction on lands the Palestinians want for their own state.

"At a time when he's being accused of being rigid and inflexible, one of the things he can achieve is trying to signal to the world that it's not true that he can't make deals," Musu said.

With files from The Associated Press