JERUSALEM: The circumstances surrounding the death of an Australian-Israeli man known as "Prisoner X" in an Israeli jail is likely to lead to negligence charges, the justice ministry said on Friday.

An Israeli probe into the death in December 2010 of the prisoner identified in Australian media as Ben Zygier, a 34-year-old Australian Jew recruited by Israel's Mossad spy agency, found it was a case of suicide.

But a justice ministry official who spoke to Israeli journalists said the judge handling the mysterious case has demanded a further probe "to examine issues of negligence".

"If she (the judge) had not found anything suspicious, she would not have transfered the case," said the official, adding charges would be filed if the probe finds there was any negligence in monitoring Zygier during his detention.

The fact that the detainee, held in a high security prison under continuous surveillance, managed to hang himself has raised questions and fed conspiracy theories which have been reported by the Israeli and Australian media.

Citing a source close to the case, the Israeli newspaper Haaretz reported on Friday that Israel had signed an agreement with Zygier's family offering a large sum of money as compensation.

The report said the deal had been agreed six weeks ago when the family was told of the findings of an investigation that determined Zygier had committed suicide.

Israeli lawyer Avigdor Feldman, who met Zygier just days before his death, said on Thursday that he had seen no indication the prisoner was planning to kill himself.

"During the entire conversation, I did not get the feeling this was a person about to take his life," Feldman told AFP, referring to the man who came to be called Prisoner X.

"I must say I was shocked when I heard about it (his death)."

Feldman described the person he met as focused and "emotionally stable," noting the prisoner faced a tough decision -- whether to accept a plea bargain or continue a trial that could be prolonged and keep him in prison for many years.

"I found a person who was indeed worried under the circumstances, but certainly not a person emotionally devastated or depressed, as far as I could judge with my layman understanding," the lawyer said.

In a separate interview on radio, Feldman expressed surprise a prisoner in "a cell which was being monitored and checked 24-hours a day, could manage to commit suicide by hanging himself".

Zygier died in isolation at Ayalon prison near Tel Aviv in December 2010.

He was reportedly set to reveal information about operations conducted by Mossad, including the misuse of Australian passports by its agents.