The meeting will be the first between Netanyahu and George Mitchell since Netanyahu was tapped to lead Israel's next government.
The Obama administration has dispatched Mitchell to the region for the second time in its first month, reflecting its resolve to end the decades-old conflict between Israel and the Palestinians. Hillary Rodham Clinton is due in the area next week on her first trip since being appointed the new U.S. secretary of state.
Mitchell hopes to re-energize stalled talks, but Netanyahu wants to promote Palestinian prosperity instead of Palestinian statehood. Netanyahu also is committed to expanding Jewish West Bank settlements, while Mitchell has urged a settlement freeze since 2001. The Palestinians reject Netanyahu's approach.
Mitchell arrived in Israel on Thursday from Turkey and headed straight into a meeting with Foreign Minister Tzipi Livni before sitting down with Netanyahu.
In Ankara, he said predominantly Muslim Turkey's friendship with Israel gave it a unique opportunity to help achieve Middle East peace - a reflection of Washington's desire to see the two U.S. allies mend ties frayed during Israel's recent offensive in the Gaza Strip.
On his first trip to the region last month, Mitchell promised a vigorous push for Israel-Palestinian peace but publicly offered no glimpse into how the Obama administration planned to proceed. A U.S. official said Mitchell was not expected to make any public policy statements this time, either.
Such statements might await Clinton's visit or be put off until Netanyahu forms his government.
Despite his own hawkish leanings, Netanyahu knows the international community would like to see a moderate coalition lineup. But his efforts to woo moderate parties that would trade land for peace have not been going well.
Livni's Kadima Party and Defense Minister Ehud Barak's Labor Party have rejected his overtures, in part because of his opposition to peacemaking. Netanyahu's alternative is to team up with other nationalist and religious parties in a narrow alliance that could easily break apart over conflicting domestic agendas or international pressure to make concessions to the Palestinians.
One of Mitchell's immediate goals in the region is to shore up a shaky, informal cease-fire that ended Israel's bruising offensive against Gaza Strip militants last month. Egyptian officials have been trying to mediate a long-term truce between Israel and the Islamic militant Hamas group that rules Gaza.
Low-level violence has marred the Jan. 18 cease-fire, and on Thursday, militants fired two rockets at southern Israel, the military said. No injuries were reported.
In his talks with Israeli officials and with Palestinian leaders on Friday, Mitchell is also expected to focus on the need to rebuild Gaza after the Israeli offensive and efforts to reconcile feuding Palestinian factions.
The Palestinians hope to raise $2.8 billion at an international donor's conference in Egypt on Monday, where the U.S. is expected to pledge $900 million.
The success of reconstruction efforts will depend largely on Israel's agreement to reopen border crossings into Gaza to let through building materials and other equipment and commodities. Israel blockaded its borders with Gaza after Hamas militants overran the territory nearly two years ago, prying them open only to let in limited humanitarian supplies.
Truce talks recently deadlocked over Israel's insistence that Hamas release a long-held Israeli soldier before border crossings are opened.
A power-sharing deal between Hamas and the moderate West Bank government of Palestinian President Mahmoud Abbas is also seen as key to reconstruction efforts. Many in the international community shun the violently anti-Israel Hamas and won't send money directly to it.
In a report obtained by The Associated Press on Thursday, Palestinian Prime Minister Salam Fayyad asked donors to channel aid "first and foremost" through his West Bank government.
Hamas and Fatah representatives have been meeting in Cairo this week for Egyptian-mediated talks. But earlier rounds of reconciliation efforts failed, and the two sides remain bitterly divided nearly two years after Hamas overran Gaza.