Foreign Minister Silvan Shalom, in New York for a UN summit and ministerial meetings, said on Monday that with the end of Israel's 38-year Gaza occupation, it was the Arabs' turn to make the next move.
He went so far as to say his nation was willing to negotiate with archenemy Syria if it stops supporting militants.
"I think that the time has come after we ended our withdrawal of Gaza [for Arabs] to take the initiative, take a move forward to have better relations with Israel," Shalom told reporters after talks with Tunisia's foreign minister.
Shalom has held several meetings with Arab leaders over the last week, boosting hopes of a new era of cooperation in the Middle East.
He has also been telling Arab and Islamic countries that opening ties with Israel would be the best way to help the Palestinians.
Tunisia's Foreign Minister Abdelwahab Abdullah left the 40-minute meeting after shaking hands with Shalom and made no comments to reporters.
In a speech later to the UN General Assembly, Abdullah called on all parties to take advantage of the "positive developments" in the region to resume negotiations on creating a Palestinian state and bringing about peace.
"I think that the time has come after we ended our withdrawal of Gaza [for Arabs] to take the initiative, take a move forward to have better relations with Israel"
Israeli foreign minister
Shalom also announced he would visit Tunisia in November.
Tunisia broke off formal, low-level ties with Israel after the September 2000 outbreak of large-scale Israeli-Palestinian violence.
But some commercial ties remain.
Later on Tuesday, ministers from the so-called quartet, the UN, the US, the European Union and Russia, were to meet at the United Nations to assess Israel's withdrawal from Gaza.
They were expected to focus on the difficulties in reviving the Palestinian economy and getting Israelis and Palestinians to return to the road map peace plan.
They were also likely to touch on continued signs of division among Arab leaders over whether and how far to go beyond symbolic gestures to reward Israel for its Gaza withdrawal.
Shalom said he was optimistic about the possibility of closer ties with the Arab world that could eventually lead to full diplomatic relations.
Last week he met Qatar's foreign minister, who urged Arab countries to make gestures towards Tel Aviv after the withdrawal.
Arab states are still divided on
how to deal with Israel
But while that meeting was rare, attempts to bring together Qatar's ruler and Israeli Prime Minister Ariel Sharon did not materialise at the UN summit last week.
Also last week, Sharon shook hands and exchanged pleasantries with Pakistani President Pervez Musharraf, whose country has long taken a hardline stand against the Jewish state.
Shalom said Arab officials he met had a "positive attitude" about the future prospects for relations, although he indicated breakthroughs may not be achieved immediately.
Asked whether his talks with Arab officials could lead to diplomatic relations, Shalom replied: "Of course, they're considering it. They believe, too, this is the appropriate time. We're making some progress.
"I don't know if we are going to have full diplomatic relations, but we are taking some steps forward with all those countries."
Yet Shalom made comments on Monday night that were likely to stir tensions again.
He repeated Sharon's warning that Israel would move to impede Palestinian elections set for January if the armed resistance group Hamas took part.
Shalom told leaders of major US Jewish organisations that the government had no obligation to assist a vote that involved a group like Hamas, which calls for Israel's destruction.
Lack of consensus
The Arab League still has not set a date for a summit to discuss the Gaza withdrawal or Iraq, apparently due to lack of consensus on the issues.
Saudi Crown Prince Sultan said in New York last week that Israel should withdraw from more Arab land after Gaza, sticking to the pan-Arab position that full recognition and peace will come when Israel fulfils Arab conditions.
The Arab peace plan calls on Israel to withdraw from all territory captured in the 1967 Middle East war, the establishment of a Palestinian state and a solution for
Palestinians want Gaza, the West Bank and traditionally Arab East Jerusalem for their future state, while Syria wants the return of the Golan Heights.