Li began his trip on Sunday with a meeting with his Israeli counterpart Silvan Shalom, topped by a friendly ping-pong match in front of dozens of onlookers at the Israeli Foreign Ministry in Jerusalem.
The men, wearing matching white T-shirts decorated with the Israeli and Chinese flags, laughed and warmly embraced each other at the match. Li won 11-8.
"I had to lose in order to avoid a diplomatic incident," Shalom quipped.
Li's visit comes amid a warming of ties between China and Israel. Trade between the countries has grown to $2.4 billion from $1.2 billion in 2000.
The Chinese minister said he expected the number to double again by 2008.
"My purpose of the visit here is to step up our joint efforts for the common cause of our peoples," Li told reporters. He is scheduled to meet Prime Minister Ariel Sharon and Palestinian officials during his visit.
His arrival coincided with a visit to Israel by US Secretary of State Condoleezza Rice, who said she had discussed Israeli security cooperation with China during her talks with officials.
Mark Regev, spokesman for the Israeli Foreign Ministry, said the spat with the US "did not come up" in Sunday's talks between the Israeli and Chinese foreign ministers.
Shalom (L) and Li engaged in talks
and a game of table tennis
But ahead of the visit, Shalom acknowledged in a newspaper interview that "a crisis exists" with the US, though he said the two sides were "very close" to resolving it.
The dispute stems from the Israeli sale of drone aircraft technology to China.
Drone parts were shipped to Israel last year for what American defence officials said was an upgrade.
Israel has denied the US contention, saying the project was routine maintenance. Israeli military officials have said work on the deal has been frozen.
Israeli media reported this month that the US had imposed sanctions on the Israeli arms industry in response to the sale of military technology to China. US officials have acknowledged a strain in relations over the matter.
Washington fears an arms build-up by China could threaten US-ally Taiwan.
Rice said defence officials from both countries were working together and that she was confident the Israelis would address the American concerns.
"I believe we'll be able to get there," she said. "I still think there's some work to be done."
The dispute has put Israel in a sensitive position. Tel Aviv fears a strain on its relations with China if proposed deals are cancelled.
In 2000, Washington torpedoed a $2 billion Israeli sale of Phalcon reconnaissance planes to China, causing ill will between Tel Aviv and Beijing.
But Israel places great importance on its ties with the US, its closest ally.
Yuval Steinitz, chairman of the parliamentary Foreign Affairs and Defence Committee, told Israel TV on Sunday that there was no question that Israel would give in to the American demands in the interest of preserving the countries' relations.