It is the last hurdle to negotiations between Afghanistan’s political leadership and the Taliban under a peace deal signed with the US earlier this year.
The meeting of the council of elders, known as Loya Jirga, was initially expected to last three days but could end as early as Saturday.
The Kabul-Taliban negotiations are seen as a critical step towards lasting peace in Afghanistan and a road map to what the country might look like after decades of war, with the Taliban joining the political mainstream.
They are also to decide what constitutional changes should be made in a post-war Afghanistan and how the rights of women and minorities could be protected.
Negotiations could also determine the fate of the tens of thousands of heavily armed men on both sides of the conflict – the Taliban on one side and the warlords and armed militias loyal to Kabul on the other.
The Taliban rejected Friday’s gathering in Kabul, claiming it had no legal status.
US Secretary of State Mike Pompeo issued a statement late on Thursday saying the 400 prisoners had to be released if peace talks with the Taliban were to move forward.
“We acknowledge that the release of these prisoners is unpopular,” Pompeo said.
“But this difficult action will lead to an important result long sought by Afghans and Afghanistan’s friends – reduction of violence and direct talks resulting in a peace agreement and an end to the war.”
Afghan President Ashraf Ghani has so far freed all but 400 of the Taliban prisoners, insisting on a traditional council to decide their release and saying their crimes were too serious for him to decide on alone.
At the council on Friday, Abdullah Abdullah, who was made head of the High Council for National Reconciliation to end political infighting in Kabul, took over the leadership of the Loya Jirga from its previous head, Abdul Rasul Sayyaf, a warlord.
Mr Ghani told participants they must quickly decide “one way or another” on the 400 Taliban prisoners.
If the council agrees to free the 400 Taliban – the last batch of prisoners whose release the insurgents have demanded under the US-Taliban accord from February – talks between Kabul and the Taliban could begin as early as Monday.
A survey circulated at the Loya Jirga on Friday put the choice bluntly – decide to free the Taliban prisoners and talks could begin on Monday or refuse and the war will continue.
If the Taliban are freed, direct talks could be followed by a lasting ceasefire.
Since the deal with the US in February, the Taliban have not attacked American and Nato troops but have continued to wage war on Afghan security forces.
The US and Nato have also started withdrawing some troops in line with the agreement.
The deal calls on the Taliban to guarantee that Afghanistan will not be used as a staging ground for attacks on the US or its allies.
The withdrawal of US and Nato troops hinges on the Taliban meeting those commitments and not on a positive outcome to negotiations between the Taliban and Kabul’s political leadership.
The deal also called on Kabul to free 5,000 Taliban while the insurgents were to free 1,000 government and military personnel.
