"Taking yesterday`s discussions forward. PM @narendramodi and PM @netanyahu meet for restricted talks in Jerusalem," External Affairs Ministry spokesperson Gopal Baglay tweeted along with pictures of the two leaders.
Earlier in the day, Modi called on Israeli President Reuven Rivlin.
Rivlin broke with protocol, welcoming Modi with a hug as he alighted from his car.
"I am very grateful to the President for welcoming me so warmly," Modi told the media.
"He broke protocol and came out to the alighting point to welcome me. This is a mark of respect for the people of India."
Later on Wednesday, Modi is scheduled to meet Moshe Holtzberg, who lost his parents in the attack on the Chabad House in Mumbai during the 26/11 terror attacks.
Moshe -- who was a baby then, he is now a young boy of 10 -- was rescued by his Indian nanny.
In the evening, Modi will also address a 4,000-strong gathering of the Indian diaspora in Israel.