A second day of Middle East peace talks is due to take place following their resumption in Washington DC after months of diplomacy by US Secretary of State John Kerry.
The talks began again after three years as Israel approved the release of more than 100 Palestinian prisoners.
Israeli and Palestinian negotiators attended a dinner hosted by Mr Kerry in the US capital on Monday night.
US President Barack Obama has warned that "hard choices" lie ahead.
Core issues
Jerusalem: Palestinians want East Jerusalem as capital of future state; Israel unwilling to divide it
Borders and settlements: Israel wants to keep major Jewish settlements; Palestinians want borders along 1967 lines but accept some settlements will have to stay in return for land swaps
Palestinian refugees: Israel rejects idea of a Palestinian "right of return"
Security: Palestinians want full attributes of normal state; Israel wants to curtail this.
In the last five months, Mr Kerry has made six official visits to the Middle East in an effort to restart the negotiations.
'Daunting'The 90-minute dinner in Washington was attended by Israel's chief negotiator, Justice Minister Tzipi Livni, and her Palestinian counterpart Saeb Erekat.
A former US ambassador to Israel, Martin Indyk, appointed US special envoy to the talks, also attended the "iftar", the traditional meal at the end of each day of fasting during the Muslim holy month of Ramadan.
Ms Livni told Israeli public radio that the atmosphere at the talks was "positive", and insisted that the talks were resuming "not just in response to US pressure but because it's in the interest of both parties".
But she acknowledged that disagreements within Israel's governing coalition could pose an obstacle to any deal.
A US state department official said: "It was a constructive and productive meeting between the parties. They engaged in good faith and with seriousness of purpose.
"We are looking forward to continuing the talks."
Analysis
Over dinner at the state department, Israeli and Palestinian negotiators sat with John Kerry and Martin Indyk to start thrashing out some of the procedural details of forthcoming talks: format, schedule and location.
Because the two parties haven't had direct talks in three years, these are basic but essential starting points. There will be more talks on Tuesday and then negotiators will head home at the end of the day. If all has gone well, the next round of talks is expected to take place in the Middle East, with Mr Indyk at the helm. It's still unclear at what point the two sides will delve into the real issues at the heart of the matter.
The sceptics say this is all just process and the reality on the ground means that Mr Kerry is on a fool's errand. But Mr Kerry has had his heart set on the goal of a peace deal for some time, and he is hoping his determination will keep the talks going long enough that they will actually get somewhere.
Mr Indyk said earlier he was looking forward to working with both sides to "do our best to achieve President Obama's vision of two states, living side by side in peace and security".
The seasoned diplomat played a key role in the failed Camp David talks of 2000 under former President Bill Clinton.
At a news conference in Washington on Monday, Mr Kerry urged both sides to make "reasonable compromises" for peace.
"I know the negotiations are going to be tough, but I also know the consequences of not trying will be worse," he said.
State department spokeswoman Jen Psaki suggested the goal of initial talks would be to chart a way forward rather than try to tackle the thorny issues between the two sides - which include the status of Jerusalem, Jewish settlements on the West Bank, the borders and functions of a future Palestinian state, and the status of Palestinian refugees.
Hanan Ashrawi, a senior Palestinian official, told AFP news agency on Monday: "There must be a timeline and commitment from both sides on what they'll agree about. We hope for something good."
Martin Indyk
- Two stints as US ambassador to Israel from 1995 and 2000
- Worked with Israeli PMs Rabin and Barak on Oslo peace process
- Served on National Security Council and responsible for Middle East at US state department in 1990s
- Director of Foreign Policy Program at Brookings Institution
- July 2013 succeeds David Hale as Middle East envoy
The issue of settlement-building halted the last direct talks in September 2010. Settlements are considered illegal under international law, although Israel disputes this.
On Sunday, the Israeli cabinet approved the release of 104 long-term Palestinian prisoners by 13 votes to seven.
The inmates are to be released in four stages over a number of months, linked to progress in the peace process.
Their identities have not been published, but according to reports they include those who have killed Israelis or Palestinian informers.
Sunday's cabinet meeting was delayed by an hour as Israeli Prime Minister Benjamin Netanyahu sought support for his proposal.
The cabinet also approved a draft bill requiring a referendum for any peace agreement with the Palestinians that involves territorial concessions.
Mr Netanyahu's office said it was important that every citizen voted directly on such decisions.
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