Benedict, who has expressed his desire to visit the Holy Land, has a long-standing invitation from Israel. But a tax dispute and other issues have so far prevented a visit, and the two sides are also at odds over the conduct of wartime Pope Pius XII.
A trip to the area would be expected to include a visit to the Palestinian territories.
The Vatican spokesman, the Rev. Federico Lombardi said Thursday that "diplomatic contacts are under way to study the possibility of a visit by the Holy Father to the Holy Land next year."
Lombardi declined to comment on any possible dates, saying contacts were still at an early stage.
The office of Israeli President Shimon Peres also said the two sides were working on the issue, with no dates set.
The Holy See and Israel established diplomatic relations in 1994, after hundreds of years of painful relations between Catholicism and Judaism. But they must still resolve the status of expropriated church property, tax exemptions for the Church and permits for Arab Christian clergy traveling to and around the West Bank.
Another point of contention centers on the figure of Pius XII, the pontiff who reigned from 1939 to 1958 and was a Vatican diplomat in Germany before that.
Israel says Pius did not do enough to save Jews from the Holocaust during World War II. A caption accompanying a photograph on display at Jerusalem's Yad Vashem Holocaust memorial says Pius did not act to save Jews from the Nazi genocide and kept a largely "neutral position."
The caption angered the Vatican, although Lombardi said recently that it would not prevent a papal visit.
The Vatican maintains Pius helped Jews and other victims through quiet diplomacy. Benedict recently stepped up defense of his predecessor, saying Pius spared no effort to save Jews from the Nazis.
The Vatican has put Pius on the path to sainthood. However, Benedict was recently reported to have said that he would consider freezing the process until the Vatican's wartime archives are opened.