US peace efforts are teetering on the brink of collapse after Israel refused to free a group of 26 veteran Palestinian prisoners under an agreement which brought the sides back to the negotiating table in July 2013.
Furious Palestinian officials have warned that unless Israel changes its stance on the prisoner releases, it could signal the end of the talks.
Kerry's arrival in Tel Aviv came as the Palestinian leadership was to meet in the West Bank town of Ramallah to discuss the latest standoff.
With his work cut out, Kerry is likely to hold meetings in Jerusalem and the West Bank town of Ramallah today and tomorrow.
US State Department spokeswoman Jen Psaki said Kerry's team had been working with both parties to "agree on a path forward".
"After consulting with his team, Secretary Kerry decided it would be productive to return to the region," she told reporters in Paris shortly before departing for Tel Aviv.
But the question of extending the talks has become intricately tied up with the fate of the 26 prisoners.
Just a day ahead of the expected releases, Israel said it would not free detainees convicted of deadly attacks unless the Palestinians would commit to extending the negotiations.
But the Palestinians say they will not even discuss any extension of the negotiating period unless Israel frees the prisoners.
The impasse has triggered "intense" US efforts to resolve the dispute, with Kerry speaking with both sides earlier today.
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