He became a significant figure in prison, writing political works and calling for agreements with Israel.
Younis holds Israeli citizenship, but Israel’s interior minister has called for it to be revoked.
Aryeh Deri told an ombudsman that it would send an important message to those who have “become a symbol for committing criminal acts of terror”.
Palestinian President Mahmoud Abbas said Younis “represents a symbol of the Palestinian people and the free people of the world in steadfastness”.
Israeli media reported that Younis was released in the central Israeli town of Raanana before dawn on Thursday without his family being notified in order to prevent celebrations.
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He was later greeted by family and friends in his home village of Ara, in northern Israel, where police have been instructed by national security minister Itamar Ben-Gvir to monitor the reception he receives.
Mr Ben-Gvir tweeted that he would see that such people were only freed from prison “in humiliation” until the new right-wing government passed a law imposing the death sentence on terrorists.
“It was 40 years full of stories, prisoners’ stories and each story is a story of a nation,” Younis said, with a black and white keffiyeh wrapped around his shoulders.
“I am very proud to be one of those who made sacrifices for Palestine and we were ready to sacrifice more for the sake of the cause of Palestine.”
Younis wrote before his release that he felt sorrow for the Palestinian inmates he would be leaving behind in prison. They include his cousin, Maher Younis, who was convicted of the same kidnapping and murder and is expected to be released later this month.
Avi Bromberg’s sister, Adah, told the Israel Hayom newspaper on Tuesday that it was “unthinkable that such people should walk among us, laugh, and enjoy themselves”.
President Abbas said securing the release of Palestinian prisoners from Israeli jails was “the cause of the entire Palestinian people”.
About 4,700 are being held in Israeli prisons and detention centres, according to Palestinian human rights group Addameer. It says they include 150 minors and 835 administrative detainees, who have neither been charged nor tried.
The Nation