Palestinian Authority President Mahmoud Abbas met Israel's Defence Minister Benny Gantz late on Sunday night.
It was the first meeting between the Palestinian leader and a senior Israeli official in more than a decade, after such dialogue stopped under former Israeli Prime Minister Benjamin Netanyahu.
Mr Gantz said the meeting, hours after he returned from the US, aimed at finding ways to enhance the Palestinian Authority's economy.
"This evening I met with PA Chairman Mahmoud Abbas to discuss security-policy, civilian and economic issues," Mr Gantz wrote on Twitter.
"I told Chairman Abbas that Israel seeks to take measures that will strengthen the PA's economy."
Head of the Palestinian Authority's General Authority of Civil Affairs and close confidant of Mr Abbas, Hussein Al Sheikh, confirmed the meeting.
He said the discussion encompassed "all aspects" of Palestinian-Israeli relations.
Mr Gantz has just returned from a trip to Washington with Israel's newly elected prime minister, Naftali Bennett, who met senior US officials including President Joe Biden.
Mr Gantz first spoke with Mr Abbas in July in a phone call and wished him well during Eid Al Adha.
"We discussed the need to advance trust-building steps between Israel & the PA which will benefit the economy and security of the entire region," he wrote on Twitter in July.
During the tenure of former US president Donald Trump, Mr Netanyahu's policy towards Palestinians took a hardline stance with threats to annex much of the West Bank and Jordan Valley.
Mr Trump moved the US embassy to Jerusalem, recognising Israel's claim to the city that Palestinians seek the eastern half of for their future capital. He also cut aid and financial support to the Palestinians. The moves led to a deterioration in US-Palestinian relations.
But an official in the Israeli prime minister's office downplayed the meeting on Sunday night saying that it was focused on security and not about a return of long-stalled peace talks.
"There is no diplomatic process with the Palestinians nor will there be,” the official told Times of Israel.
The Biden administration restarted aid and reached out to Palestinians, but it has not changed the status of the new embassy in Jerusalem.
Mr Abbas has faced shrinking popularity and repeated demonstrations in part over the dire economic situation in the West Bank.
The Haaretz daily said the meeting took place in the town of Ramallah in the Israeli-occupied West Bank, where the Authority is headquartered.