As part of his tour, the pope will meet Shimon Peres, the Israeli president, and Avigdor Lieberman, the country's right-wing foreign minister, as well as Christian, Druze, Jewish and Muslim leaders.
Benedict will also meet Palestinian political leaders.
During his five-day tour of sacred sites, the pope is expected to offer his support and help for the stalled Israeli-Palestinian peace process.
The Vatican supports a two-state solution to the conflict.
Benedict also plans to visit Palestinian refugees living close to where Jesus is said to have been born, a site in the occupied West Bank all but surrounded by Israel's separation wall.
The Vatican has said the visit to the Aida refugee camp near Bethlehem, to take place on Wednesday, is being made as an act of solidarity with the refugees' suffering, but it will be unpopular for some in Israel.
Al Jazeera's Sherine Tadros in the occupied Palestinian East Jerusalem, said: "I think it is almost impossible to come to an area like this and not talk about political issues. Politics is in the air here.
"Already there are Palestinians, both Christians and Muslims, that have said to us here that they are concerned that he is spending his first day in West Jerusalem.
"Israeli protocol dictates visiting West Jerusalem and Israeli dignitaries, and shaking the hand of foreign minister Lieberman, Peres and Netanyahu - right-wing politicians who back the recent Israeli war in Gaza that killed 1,400 Palestinians.
"So, certainly some see it as bad taste for the pontiff to be visiting West Jerusalem and shaking the hands of these politicians at this time."
Peres, speaking at a welcoming ceremony for Benedict on Monday, said his visit would bring religious understanding.
"Your visit here brings a blessed understanding between religions and spreads peace near and far," he said.
"I see your visit here, to the Holy Land, as an important spiritual mission of the highest order: a mission of peace. A mission of planting seeds of tolerance and uprooting the weeds of fanaticism."
The pope has said that he is travelling to the region as a "pilgrim" and that he will continue to advocate for inter-faith understanding, as he did in Jordan.
|The pope has been criticised for meeting Israeli leaders who supported the Gaza war [AFP]
He also aims to encourage Christians in Palestine to stay in the territories.
Christian communities have dwindled in recent decades in the Middle East, as wars, political instability and poverty have prompted many to leave.
The overall theme of the pope's visit to the Middle East has been Christian-Muslim relations.
He addressed government officials and religious leaders in Jordan's al-Hussein mosque in Amman on Saturday, saying that both Muslims and Christians must strive to be seen as faithful worshippers of God.
High levels of security are being put in place in Israel for the visit, with large parts of Jerusalem to be shut down and air space to be closed for Benedict's arrival.