Turkish prime minister Tayyip Erdogan has repeatedly called on Israel to end its blockade of Gaza [Reuters]

Turkey's foreign minister has said that the country wants improved ties with Israel, but that this would be contingent on Israel apologising and offering compensation for its deadly raid on a Gaza-bound aid flotilla.

"We have the intention of making peace with Israel," Ahmet Davutoglu told state media on Saturday.

"Why should we want bad relations with a country with whom we are trying to broker peace," he said, referring to Turkey's mediation between Israel and Syria in 2008.

"Turkish citizens have been killed in international waters, nothing can cover up this truth," he added.

"We want to both preserve relations and defend our rights. If our friendship with Israel is to continue, the way for it is to apologise and offer compensation."

Davutoglu was speaking on the eve of the return of the raided Turkish ship, Mavi Marmara, to Istanbul.

The US and European Union have called on Turkey and Israel to overcome tensions and renew close links that could be used to help with negotiations regarding peace in the Middle East.

The two countries built strong military and economic ties over the past 15 years, with Turkey becoming Israel's closest ally in the Muslim world.

However, relations soured when Turkey's government began to increasingly criticise Israel's treatment of Palestinians.

Relations hit an all-time low in May, when Israeli naval commandos killed nine people from Turkey on board a Gaza-bound ship that tried to break Israel's naval blockade.

Turkey withdrew its ambassador from Tel Aviv and Turkish leaders denounced Israel repeatedly over the raid.

Recep Tayyip Erdogan, the prime minister, has since demanded that Israel end its blockade of Gaza.

Israeli commandos said they opened fire in self-defence after meeting what they called unexpected resistance when they boarded the ferry.

While Israel termed the flotilla's attempt to break the blockade an orchestrated provocation, it significantly eased import restrictions over land following the raid.

High-ranking Israeli and Turkish officials recently held two days of talks in the Swiss capital Geneva aimed at mending ties after Turkey sent aircraft and firefighters to help Israel fight a wildfire earlier this month.

Israel's preconditions for improved relations are for Turkey to return its ambassador and to remove discussion of the raid from the agenda for talks.