But a Government statement released following reports of the deal yesterday stopped short of denying the killers' release had been part of peace process negotiations.
Instead, the statement issued on behalf of Justice Minister Michael McDowell said the Government would not authorise any such release "in the context of continued Provisional paramilitarism".
"The Government's position has not changed and will not change," the statement continued.
The statement appears to differ significantly from previous assurances given by Taoiseach Bertie Ahern on February 10, 1999.
"I have clearly and unambiguously made clear since Good Friday 1998, that any references by the Sinn Féin negotiators regarding the release of the late Jerry McCabe's murderers could not be considered. At no time was anyone given any comfort about these people and neither will they be," he told the Dáil as those responsible were jailed for the manslaughter of Det McCabe in Adare, Co Limerick, in June 1996.
The suggestion that a deal could have been considered in the context of an overall agreement was greeted with anger by Det McCabe's family, gardaí and political parties North and South.
A friend of Detective McCabe's widow Ann said the family was distressed the issue had re-emerged.
"Ann is trying to get on with her life as best she can and all she expects is that this issue doesn't keep coming up again and again," the friend said.
Fine Gael leader Enda Kenny said last night's statement raised fresh concerns and appeared to be an attempt at a cover-up.
"I have a very simple question for the Taoiseach. Did the Government offer to release these killers as an incentive to Sinn Féin and the republican movement to fulfil their commitments under the Good Friday Agreement, or did they not?" he said.
Labour justice spokesman Joe Costello called on the Government to clarify whether the offer to release the prisoners might still be on the table. "Such a move would be in direct conflict with assurances given by the Government to the Dáil, the garda representative bodies and most importantly of all to Jerry McCabe's family," he said.
Paul Brown, a GRA executive member, said the organisation would be seeking an immediate meeting with Mr McDowell. "The morale of An Garda Siochána would be deeply affected if this turns out to be true," he said.
Association of Garda Sergeants and Inspectors president Joe Dirwan also demanded an explanation. "This will seriously undermine our efforts to enforce law and order," he said.
In Dublin yesterday, Sinn Féin's Martin McGuinness said the prisoners should be released under the terms of the Good Friday agreement but declined to comment about whether a release was one of the Government's commitments during last year's negotiations.