Netanyahu's comments were a formal response to a speech last week by Egyptian President Abdel Fattah al-Sisi, who promised Israel warmer ties if it accepted efforts to resume peace talks.
"The Arab peace initiative includes positive elements that can help revive constructive negotiations with the Palestinians," Netanyahu said, echoing comments he made a year ago to Israeli reporters.
"We are willing to negotiate with the Arab states on revisions to that initiative so that it reflects the dramatic changes in the region since 2002 but maintains the agreed goal of two states for two peoples," he added.
His comments were also made in English during a speech that was mostly in Hebrew.
Netanyahu spoke moments after Avigdor Lieberman was sworn in as Israel's new defense minister and Israel's fragile right-wing coalition gained support in parliament.
Netanyahu appeared to indicate that the new far-right defense minister's inclusion in the government did not spell an end to peace efforts with the Palestinians.
Speaking after Netanyahu, Lieberman added to the discussion of the Arab Peace Initiative: "President Sissi’s speech was very important; it creates a genuine opportunity that obligates us to pick up the gauntlet. I certainly agree that there are some very positive elements in the Arab Peace Initiative that will enable us to conduct serious dialogue with our neighbors in the region." He also said he supports the two-state solution: "I agree with two states for two people...I was very supportive of the Bar-Ilan speech," referring to Netanyahu's 2009 speech, in which he expressed support for the two-state solution.
The original Arab plan offered full recognition of Israel but only if it gave up all land acquired in the 1967 Middle East war and agreed to a "just solution" for Palestinian refugees.
But in 2013, after the initiative's terms were softened to include possible land swaps between Israel and the Palestinians, Netanyahu signaled a readiness to consider it.
Israel has demanded tighter security measures from the Palestinians and a crackdown on militants who have attacked or threaten the safety of Israeli citizens.
France is set to host a peace conference of to revive peace efforts on June 3 with the participation of ministers from the Middle East Quartet - the United States, Russia, the European Union and the United Nations - the Arab League, the UN Security Council and about 20 countries.
Neither Israel nor the Palestinians have been invited.