"We are going to discuss the Iranian nuclear programme and ways of progressing talks with the Palestinians," Netanyahu said as he met Merkel at his Jerusalem residence, according to Israeli public radio.
"Israel wants to reach a real peace that will put an end to the conflict" and secures recognition from the Palestinians of Israel as the state of the Jewish people, Netanyahu added.
Germany is part of the so-called P5+1 group of world powers -- along with the United States, Britain, France, China and Russia -- which hope to negotiate a comprehensive accord with Tehran in order to allay fears about Iran's nuclear programme.
The Israeli prime minister said Monday he hoped "Germany and the other P5+1 countries will insist on the genuine demands to prevent Iran from becoming a nuclear threshold state."
Israel, the region's sole if undeclared nuclear-armed state, has long suspected Iran of pursuing nuclear weapons, charges repeatedly denied by Tehran.
Ahead of her arrival, Merkel stressed she will be supporting efforts by US Secretary of State John Kerry to resolve the decades-old Israeli-Palestinian conflict.
Merkel and the 16 ministers accompanying her were due to sign cooperation agreements with Israeli ministers in a broad variety of fields including security, diplomacy, economy, justice, science and culture, Netanyahu's office said.
