Netanyahu said he would meet with US envoy Jason Greenblatt for a second time this week on Thursday to try to reach an "agreed-upon policy" on settlements, one of the most contentious issues in decades-old peace efforts.
The Palestinians view the building of settlements on land they want for their future state as one of the main obstacles to peace, a position largely supported by the international community.
US President Donald Trump voiced support for Israel's position on the campaign trail but has since asked it to "hold off" on settlement construction as he seeks to restart the peace process, which last collapsed in 2014.
Netanyahu said reaching an understanding with Washington on the settlements would be "good for Israel," but said he would honor a promise made last month to build a new settlement to replace Amona, an illegal settlement outpost built on private Palestinian land that was forcibly dismantled following a ruling by Israel's Supreme Court.
Greenblatt meanwhile met with the chief foreign envoy of the Yesha council, which represents the settlements. The council said it was a "fruitful and positive" meeting, without providing further details.
Trump campaigned on promises that he would depart from decades of US foreign policy on the Israeli-Palestinian conflict.
However, he seems to have backed off on both since assuming office. At a White House meeting with Netanyahu last month, Trump said he was open to a two-state solution and urged restraint on settlement construction. Plans to move the embassy appear to have been put on hold.
The international community views settlements built in the West Bank and east Jerusalem—territories seized by Israel during the 1967 Six-Day War and claimed by the Palestinians as part of their future state—as illegal.