JERUSALEM, Feb. 24-- Israeli Prime Minister Benjamin Netanyahu and visiting German Chancellor Angela Merkel expressed Monday evening their hopes to advance the peace process between Israel and the Palestinians.

Merkel, leading 16 ministers from her cabinet on a 24-hour visit to Israel, said that Germany is committed to advancing the Israeli-Palestinian talks based on the two-state solution.

"Germany has been working with Israel for the past five decades in order to assure its future," the chancellor was quoted by Channel 2 News as saying. "We want to see progress in the negotiations with the Palestinians and I'm an enthusiastic supporter of the two-state solution."

Netanyahu, for his part, said he and the people of Israel "want peace which would end the conflict."

In addition, he said the talks with the German chancellor would also tackle how to prevent Iran from reaching nuclear weapons, calling it "the biggest challenge the world is facing."

Merckel's visit comes amid the 50th anniversary of the establishment of diplomatic ties between Israel and Germany. A joint cabinet meeting will be held on Tuesday morning.

Merkel is also slated to meet with Israeli President Shimon Peres, who will award Merkel with the Presidential Medal of Distinction -- the highest civilian order, and with opposition parliament leader Isaac Herzog from the Labor party.

While the visit is portrayed as one strengthening bilateral ties, it is overshadowed by reported tension between Merkel and Netanyahu.

German media reported that the chancellor was displeased with Israel's policies regarding the Jewish state's occupied territories in the West Bank and the expansion of its settlements there, viewing them as an obstacle for peace.

However, on Sunday, Netanyahu gave an interview to the ZDF German TV network, denying that the settlements were the biggest obstacle for peace. "The settlements issue needs to be resolved for peace and we intend to do so, but to say it's an obstacle to peace -- when we left Gaza (in 2005) and handed it over to the Palestinians, we didn't get peace... We got a base for terrorists backed by Iran."

The Israeli prime minister intends to focus his discussions with Merkel on Iran's nuclear talks with world powers. For the past few months, he has been campaigning for maintaining the international sanctions imposed on Iran until it puts an end to its nuclear program.