The Australian muslim cleric in Iraq to help negotiate the release Douglas Wood has reportedly met the Australian hostage.
Sheikh Taj el-Din al-Hilaly claims he saw Mr Wood in person, and says the captive has been given some much-needed medication.
Ikebal Patel, from the Federation of Islamic Councils, has told Channel Seven he learnt of these latest developments in a brief mobile phone conversation with the Sheikh.
"You'd appreciate that it was on a mobile phone and he was on the run and things weren't as clear," he said.
"But he said to me 'I've seen him eye to eye', is the words he used - eye to eye - that yes, it was Douglas and I'm quite happy and satisfied that he still then has a presence and requirement."
Mr Patel says while he can not reveal all the details of the meeting, he says it has buoyed hopes Mr Wood's release is imminent.
"Most definitely, I mean this is the best news we could have had for a long time and at least we know Douglas is alive and that's the important thing," he said.
Foreign Affairs Minister Alexander Downer is not prepared to comment on the efforts to free Mr Wood except to say that Sheikh al-Hilaly has made a "good contribution".
Mr Downer told Channel Nine's Sunday program the Australian team is continuing to work towards his release.
"We remain very determined in our drive to get him released and we are still working very hard at it," he said.
"This is an extremely sensitive issue and we need to be a little careful how we express ourselves."
