"The question will be decided by the government and there will be a debate in the Knesset," he said, referring to parliament.
He spoke amid growing rumours in Israel, Gaza and Egypt that a deal was imminent in German-mediated talks to swap Gilad Shalit, seized by Gaza militants in 2006, for hundreds of Palestinian prisoners.
A day after Israeli President Shimon Peres spoke of "progress" in the talks, Shalit's parents met senior officials and a Hamas delegation arrived in Egypt, a key player over months of indirect talks.
"I can't give any details of this morning's meeting," Noam Shalit, the 23-year-old soldier's father, told AFP. "I will be reassured when my son is by my side, not before."
Israel's Channel 10 reported that Netanyahu told parliamentarians he was "confronted with an enormous dilemma, since on the one hand I want to save a life and on the other hand I need to avoid new kidnappings by terrorists."
Defence Minister Ehud Barak and Egyptian intelligence chief Omar Suleiman discussed the prisoner swap issue in a phone call later on Monday, the defence ministry in Tel Aviv said in a statement.
In Cairo, a senior Egyptian official said a deal has yet to be nailed down, and signalled that a final list of Palestinian prisoners has not yet been agreed.
"We in Egypt think that more time is needed," said the official, who asked to remain anonymous. "It's a complicated business. There is no agreement yet on the list of names of Palestinian prisoners whose release is demanded by Hamas."
A Hamas delegation from Gaza, headed by top official Mahmud Zahar, crossed the border on Monday for talks with Egyptian officials, a security source told AFP.
A senior Egyptian official said the delegation "came to inform us of the developments in the German-mediated negotiations."
Israeli military censors have imposed a blackout on information about the indirect talks.
"Recently many pieces of information originating abroad and in the foreign media have been published," Netanyahu's office said in a statement. "They are unauthorised and some of them are intentionally false."
Hamas has kept mum as well, with top officials in Gaza telling reporters they were under strict orders not to talk about the issue.
"Our position is that until anything is achieved on this matter, we are committed to not commenting, given that experience with the Israeli side does not encourage commenting on anything until the matter is decisively resolved," Hamas official Ossama Hamdan told AFP.
"There is a seriousness on our part in reaching an agreement," he added.
Shalit, who holds both Israeli and French nationality, was captured more than three years ago when Gaza militant groups, including Hamas, tunnelled out of the enclave and attacked an Israeli army post, killing two other soldiers.
In early October, Israel freed 20 Palestinian women prisoners in exchange for the first video of Shalit since he was captured.
The family of Marwan Barghuti, one of the most popular Palestinian leaders and considered the mastermind of the second intifada that erupted in 2000, said he was among those Israel has been asked to free in exchange for Shalit.
"His name is on the list," a family member told AFP in the occupied West Bank, declining to say whether there was any indication a release was imminent.
Barghuti, 50, is serving five life terms for murder for his role in deadly attacks on Israelis during the uprising, and Israel has in the past been loath to free prisoners with "blood on their hands."
Late on Monday, militants inside Gaza fired two rockets into Israel. The Israeli military said neither caused casualties or damage.
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Image: AFP/Menahem Kahana.