The 15-member bloc will also press Israel on Monday over its erection of a huge wall along the West Bank, which Brussels says is "unacceptable".
For Israel, the Association Council is usually part of regular talks aimed at increasing its cooperation with the EU.
But Israeli Foreign Minister Silvan Shalom is set to hear some frank comments from the EU foreign policy chief Javier Solana and external relations commissioner Chris Patten in Brussels.
Both senior officials are on the record as describing the Israeli ban on Yasir Arafat as regrettable and have criticised “the apartheid wall” as an obstacle to a two-state solution.
Solana is also sharply critical of Tel Aviv for totally ignoring the EU's special envoy Marc Otte after meeting with the Palestinian leader last month.
"When you have somebody there whose main task is to go back and forth between the two sides and who cannot, it's rather bizarre," Solana said.
"It's not a good diplomatic act to say to a country whom you can see and whom you can't see," he added.
Israel's wall, which will effectively cut off large swathes of fertile land and scores of villages from the rest of the Palestinian territory, has sparked international criticism.
However, Israeli leader Ariel Sharon - who will be visiting Italy during the week for talks with Prime Minister Silvio Berlusconi – continues to criticise Europe for not putting enough pressure on Arafat.
"When you have somebody there whose main task is to go back and forth between the two sides and who cannot, it's rather bizarre"
EU foreign policy chief
Sharon was forced to defend the barrier last month when a group of about 150 European lawmakers visited the region, saying it was "crucially important... to prevent people to enter Israel illegally and carry out criminal activities".
Brussels - a member of the so-called Quartet of countries sponsoring the Middle East peace "road map" - is hinting at serious diplomatic consequences if Israel does not back down.
"We're not talking about sanctions at the moment. We will be indicating that if Israel is not willing to reconsider... it cannot but have a negative impact on future relations," Solana said.
The EU-Israel talks come barely a week after a EU opinion poll sparked a minor diplomatic spat between Brussels and Jerusalem.
The poll of 7500 people in the EU found that Europeans believe Israel is the biggest threat to world peace - ahead of North Korea, Iran and the United States in joint second place.
"These figures bother us and prove that Israel and the European Union must deepen their dialogue and cooperation," the Belgian diplomat Otte told the Israeli Haaretz newspaper last week.
Commercial issues will also loom large in the talks - the EU is Israel's biggest trading partner and EU-Israel trade is worth $26 billion annually.
The two sides are notably expected to discuss the EU's Galileo satellite navigation system, a serious competitor to the US Global Positioning System (GPS).