Celebratory banners and flags have been hoisted the length of the main coastal highway from the border with Israel at Naqura to Lebanon's southern port city of Sidon.
Among those being exchanged is Samir Kantar, a Lebanese Druze who with five life terms for murder became the longest-serving Arab prisoner in Israel.
Four Hezbollah fighters captured in the July-August 2006 war which killed more than 1,200 people in Lebanon and 160 in Israel -- Khaled Zidan, Maher Kurani, Mohammed Sarur and Hussein Suleiman -- were also to walk free.
The exchange was to take place at the Naqura-Rosh Hanikra crossing at around 0600 GMT after DNA tests are carried out to confirm the identities of the two soldiers before the swap goes ahead.
In return for its two soldiers, the Jewish state was also to transfer to Lebanon the remains of 199 Palestinian and Hezbollah fighters, exhumed over the past week.
The UN-brokered swap is the eighth between Israel and the Shiite movement Hezbollah since 1991.
Israel's Jerusalem Post newspaper has billed the festivities in Lebanon, where the released men were to be flown to Beirut to be greeted by President Michel Sleiman and Prime Minister Fuad Siniora, as "a celebration of evil."
The International Red Cross -- using trucks ferried in from Jordan -- was organising the exchange, after an accord sealed by a UN-appointed German mediator, Gerhard Konrad, following months of tough negotiations.
Hezbollah, which is backed by Tehran and Damascus, has never disclosed the fate of Goldwasser and Regev, although Israeli Prime Minister Ehud Olmert said they are dead.
The families of Goldwasser and Regev will not be present at the border post of Rosh Hanikra on the Israeli side when the swap takes place.
Instead, army officials will inform the families on the soldiers' fate, as the army prepares for military funerals on Thursday in their home villages if their deaths are confirmed.
The Lebanese daily Al-Akbar, which is close to Hezbollah, said one of the two Israelis was definitely killed during his capture in a cross-border raid on July 12, 2006 but the condition of his comrade was uncertain.
Israel's cabinet gave the final go-ahead on Tuesday for the prisoner swap.
President Shimon Peres later the same day pardoned the five Lebanese, saying it was "not a happy day for having to free such murderers but we have a moral responsibility to bring our soldiers home."
The cabinet first approved the swap deal in June, but was asked to endorse it again after Israel received a Hezbollah report on missing airman Ron Arad, whose fate has long been a cause celebre in the Jewish state.
Arad has been missing since his plane was shot down over Lebanon in 1986 during that country's civil war, and although the report said he was probably dead, Israel has rejected its findings.
Hezbollah chief Hassan Nasrallah was to give a speech in Beirut's Shiite southern suburbs later on Wednesday to hail his militant group's success in emptying Israeli jails of Lebanese prisoners.
