* Palestinians say no peace talks without prisoner releases
* Bill gives courts ability to block presidential pardons
* Netanyahu's faction supported legislation
By Jeffrey Heller
JERUSALEM, May 11 (Reuters) - Israel took a step on Sunday toward enacting a law that could block any future release of Palestinian prisoners convicted of killing Israelis and impede any efforts to restart frozen peace talks.
A ministerial committee's approval of proposed legislation aimed at denying amnesty to Palestinians jailed for deadly attacks was a victory for right-wing partners in Prime Minister Benjamin Netanyahu's governing coalition.
They had been strongly critical of a deal, when the U.S.-brokered negotiations got under way in July, to free 104 Palestinian inmates described by Israel as having "Israeli blood on their hands".
Israel freed 78 of those prisoners but called off a planned release of a final group of 26 last month, citing Palestinian refusal to agree to extend the negotiations - which have since collapsed - beyond an April 29 deadline for a peace accord.
The bill, approved by a vote of 7-3 for submission to parliament, would enable judges handing down life sentences to convicted killers to declare them ineligible for presidential pardons.
Israeli presidents have largely rubber-stamped releases of Palestinian inmates agreed by Israeli governments over the years as part of peace talks or prisoner swaps for Israeli soldiers.
Palestinian leaders have ruled out any return to the negotiating table without the release of the final batch of 26 prisoners.
"This is a new attempt by Netanyahu's government to block any chance to launch a serious and real negotiation track," Wasel Abu Youssef, a senior official of the Palestine Liberation Organization (PLO), said about the committee's decision.
Netanyahu froze the peace talks after President Mahmoud Abbas's PLO signed an April 23 reconciliation deal with Hamas Islamists who rule the Gaza Strip and advocate Israel's destruction.
"Murderers should die in jail and not celebrate at home," Economy Minister Naftali Bennett, whose ultra-nationalist Jewish Home party is spearheading the bill, wrote on his Facebook page, announcing the committee had approved the legislation.
Bennett said ministers from Netanyahu's right-wing Likud-Beitenu faction also voted for the initiative. Israel, he said, was "turning over a new leaf on the war on terror and its moral responsibility regarding the families of terror victims".
But the bill, opposed by Israeli chief peace negotiator Tzipi Livni and the centrist Yesh Atid, the second biggest party in the coalition, needs to pass a series of votes in parliament to become law.
If adopted, it will have no bearing on prisoners currently serving sentences or those who have been released under presidential pardons.
Palestinians regard their people jailed by Israel as heroes in a quest for an independent state in the occupied West Bank, East Jerusalem and Gaza Strip. Israel views them as terrorists.
Some 120 Palestinians jailed without trial in Israel have been on an open-ended hunger strike, eating only salt and drinking water, for the past 18 days to demand an end to so-called "administrative detention".
Another 20 prisoners joined the strike several days ago. (Additional reporting by Nidal al-Mughrabi in Gaza and Ali Sawafta in Ramallah; Editing by Sophie Hares)