The state’s chief minister, Naveen Patnaik, announced the exchange late on Wednesday and called for the two hostages to be released “immediately, unharmed and in good health.”
Paolo Bosusco, who runs a tour company in Orissa, was captured by the rebels on March 14 along with another Italian man, Claudio Colangelo, who was released 11 days later.
Their kidnapping was the first time the rebels, who say they are fighting for the rights of India’s tribal people and landless farmers, have targeted foreigners.
Italian diplomats have been in Orissa during negotiations to free the pair, who were picked up by the Maoists while on an adventure holiday trekking in the remote district of Kandhamal.
Patnaik said in his statement that the names of the 27 prisoners, including “eight left-wing extremists”, would be issued on Thursday.
Orissa state assembly member Jhina Hikaka, who was picked up by the Maoists in a separate incident on March 24, is also due to be released in the exchange.