"I am grateful we can open a new chapter in relations between our two countries," Merkel said at a red carpet ceremony at Tel Aviv's Ben-Gurion airport.
The visit will be highlighted by a historic address to the Knesset, where she is expected to underline Germany's deep commitment to defending Israel and its right to exist, a spokesman said.
Merkel touched down at Ben-Gurion International Airport, where she was greeted by Prime Minister Ehud Olmert, an honor guard and many of the country's political and religious leaders.
At the welcoming ceremony, Olmert expressed appreciation for Merkel's "extraordinary friendship, your deep understanding of Israel's security needs and the unwavering commitment you and Germany have shown to Israel's security."
He also praised her "inspirational courage in the battle against terrorism and Iran's nuclear ambitions."
Merkel said that during her visit, "we will discuss Germany's historical responsibility as well as future projects to make the world a better place," according to a translation of her remarks. She also expressed commitment to help to resolve the 60-year-old conflict between Israel and the Palestinians.
Her speech on Tuesday, the first by a German chancellor to the Knesset, has angered some lawmakers because of the painful memories of the Holocaust.
Israel gained independence in the wake of the Nazi genocide of 6 million Jews and some 250,000 Holocaust survivors live in Israel.
Merkel arrives at a time of heightened tensions between Israel and the Palestinians, whose efforts to make peace by the end of the year have been compromised by resurgent violence and Israeli construction on lands the Palestinians claim for a future state. Peace efforts are expected to figure high on her agenda, though the chancellor will not be meeting with Palestinian leaders during her visit.
German Embassy spokesman Albert Graf said Merkel's visit was exclusively to Israel because it was designed to mark the 60th anniversary of Israel's creation and the inauguration of a new forum of meetings between members of the two countries' Cabinets.
Palestinian Foreign Minister Riad Malki said Merkel would soon pay a special visit to the West Bank to discuss German support for the Palestinians.
Germany is a major donor to the Palestinian Authority, headed by moderate Palestinian President Mahmoud Abbas.
Merkel was being accompanied by seven members of her Cabinet and a delegation of German businesspeople to underscore the strength of the countries' relations. She is to meet with Olmert, President Shimon Peres and Foreign Minister Tzipi Livni during her trip. She also is scheduled to visit Israel's national Holocaust memorial.
Germany is one of Israel's staunchest allies in Europe and is heavily involved in efforts to prevent Iran from developing nuclear weapons, a pressing concern for Israel. Merkel has stressed Germany's commitment to the security of the Israel in the face of Iranian President Mahmoud Ahmadinejad's repeated calls to wipe Israel off the map and denial of the Holocaust.
Germany is also a main contributor to the international force deployed in south Lebanon after Israel's 2006 war with Hezbollah guerrillas.
Hezbollah is currently holding two Israel Defense Forces soldiers whose seizure in July 2006 led to the 34-day conflict. Germany reportedly is involved in trying to arrange a prisoner swap.
On Tuesday, Merkel is to address the Knesset. The privilege is usually reserved for heads of state, rather than heads of government, but a special dispensation was made in Merkel's case because of her status among global leaders and what was described as her great friendship for Israel.
Merkel will deliver her address in German, provoking threats from one lawmaker to storm out of the session. Deep wounds remain in Israel from the Nazi Holocaust, despite the cordial relations that have developed with Germany over the decades.
A Merkel spokesman said the chancellor understood the sensitivity on this matter, but asked as the German head of government, to speak in her mother tongue.
Merkel is not the first German dignitary to address Knesset in German.
Then-President Johannes Rau broke that barrier in 2000, delivering an emotional appeal for forgiveness for what Germans have done.
Israel, founded in 1948, agreed to diplomatic ties with Germany only in 1965, after a fierce debate.
Today, Germany is a leading Israeli trade partner, exporting $3.5 billion worth of goods in 2007 and importing $1.9 billion. It has paid an estimated $25 billion in reparations to Israeli Holocaust survivors, and provided more than $700 million in goods and services to the Israeli government.
The 60th anniversary celebrations will center around Israel's independence day on May 8, though there will be events through 2009. There is as yet no official list of which leaders will be attending, but Peres' office said U.S. President George W. Bush and French President Nicolas Sarkozy are expected to visit.