Delegates are discussing the compensation Israel will pay to the families of nine activists killed in an Israeli commando raid on the Gaza-bound aid ship in May 2010.
The Turkish delegation is headed by Feridum Sinirlioglu, undersecretary of the Ministry of Foreign Affairs.
It is the highest-level Turkish delegation to visit Jerusalem since Turkey broke off relations with Israel because of the raid on the aid ship, The Jerusalem Post said.
In April, after Prime Minister Binyamin Netanyahu apologized for the raid, an Israeli delegation visited Ankara, Turkey, to discuss the compensation.
Once the two governments agree upon compensation, "an important stage will have been reached in upgrading our bilateral relations with Israel to the ambassadors' level," the Hurriyet Daily News quoted deputy Prime Minister Bulent Arinc as saying recently.
Arinc was charged with coordinating the compensation talks, the newspaper said.
The Turkish newspaper noted that while Israel apologized for the raid it has refused Turkey's request to lift its blockade on the Gaza Strip.