Her arrival follows deadly border clashes between the two countries during the summer. Merkel was quoted by the BBC as saying the border skirmishes "led to events that we believed were in the past."
Kosovo declared independence from Serbia in 2008. Belgrade maintains Kosovo is a breakaway republic, however.
Merkel said that if Serbia wants to join the European Union, it needs to let European security teams do their work in the region and ensure bilateral ties are normalized.
"To join us at the table … you need to do something in return," she was quoted as saying.
Serbian President Boris Tadic said his country was committed to finding a durable solution to the regional crisis.
"We are facing a very complex issue with Kosovo," he added. "Serbia has no illusion that it could bring a new conflict into the EU."
The EU is to moderate bilateral talks next week.