UPDATE 3-Netanyahu says Hamas prisoner deal may not happen

* Israeli PM circumspect; colleague sees deal in weeks

* Hamas leaders convene with mediators in Cairo

(Adds Israeli ministers on Barghouti, paragraphs 14-15)

By Dan Williams

JERUSALEM, Nov 24 (Reuters) - An Israeli prisoner exchange with Hamas has not yet been agreed and may not happen, Prime Minister Benjamin Netanyahu said on Tuesday, after a senior cabinet colleague predicted a breakthrough within weeks.

"There is still no deal, and I do not know if there will be one," Netanyahu, whose reticence on the state of the Egyptian- and German-mediated negotiations has helped stoke speculation about imminent progress, told reporters.

Leaders of Hamas, the Islamist group ruling the Gaza Strip, were in Cairo to discuss the proposed swap of captive Israeli soldier Gilad Shalit for hundreds of jailed Palestinians.

Officials close to the talks said on Monday that Israel had dropped its objections to some 160 prisoners that Hamas wants included on the release roster.

But both sides have discouraged speculation that an exchange might be in place as soon as Friday's Muslim feast of Eid al-Adha.