Musharraf, who shook hands with Israeli Prime Minister Ariel Sharon at the United Nations last week in the first such encounter between leaders of both countries, made his comments to the English-language Jerusalem Post on Monday.
"We need to sit down and talk more [with the Israelis] and see how to move forward," he told the newspaper, before a ground-breaking meeting with US Jewish leaders in New York on Saturday.
"We ought to be taking more steps."
Pakistan had been one of Israel's harshest critics in the Muslim world.
But relations began to improve after Israel's pullout from the Gaza Strip, completed last week, which has brought signs of a thaw in Israel's relations with the Arab and Muslim world.
Pakistan's foreign minister met his Israeli counterpart in Turkey last month, marking the first public talks between the largely Muslim country and Israel.
The move sparked protests in Pakistan by opposition lawmakers and their supporters.
Musharraf has said that official ties with Israel could not come until the creation of a Palestinian state.
He told US Jewish leaders on Saturday that granting the Palestinians statehood would help stop Islamic terrorism.
Israel has full diplomatic ties with four major Islamic nations - Egypt, Jordan, Turkey and Mauritania.
Egypt and Jordan have returned their ambassadors to Israel since a February ceasefire between Israel and the Palestinians.
Foreign Minister Silvan Shalom was due to meet his Tunisian counterpart on Monday in New York, an Israeli Foreign Ministry spokesman said.