The fresh discussions come amid a new three-day ceasefire agreed between Israel and the Islamist group Hamas.
A BBC reporter in Gaza says the truce is holding so far, with signs of normal life returning to the streets.
About 2,000 people have died since the fighting in Gaza began on 8 July.
Those killed include more than 1,900 Palestinians, mostly civilians, according to the UN.
Sixty-four Israeli soldiers have been killed in the fighting and three civilians in Israel have also died.
On Friday, Israeli negotiators had left Cairo after failing to agree a deal with their Palestinian counterparts.
But the Israeli delegation arrived back in Egypt's capital on Monday after agreeing to resume talks as long as the 72-hour ceasefire, which began at midnight (21:00 GMT Sunday) held.
Militants in Gaza said they had fired several rockets towards Israel shortly before the truce got under way and Israeli air strikes had continued on Sunday evening, but the ceasefire has been respected since.
The Israeli government spokesman, Mark Regev, said the Israeli military would be "ready to act to protect our people" if Hamas violated the agreement.
Hamas spokesman Sami Abu Zuhri said its representatives would be involved in the Cairo talks, but warned that it was "the last chance" to find a long-term solution to the conflict.
Correspondents say Israel will continue to demand the demilitarisation of Gaza, while Hamas will resume its calls for Israel's blockade of the Palestinian territory to be lifted.
Israel has previously said that the lifting of blockades would only be dealt with in future talks on a permanent peace deal.
In an interview on Monday, Israeli Strategic Affairs Minister Yuval Steinitz said that disarming militants in Gaza was crucial to chances of a long-term truce.
If a diplomatic solution was not possible, he told Israel Radio, then he was "convinced" that sooner or later the Israeli army would have to take "temporary control of Gaza to demilitarise it again".
Human cost of the conflict
Palestinian deaths
Israeli deaths
(Source: OCHA; 1200 GMT on 11 August)
Indirect talks between Israeli and Palestinian negotiators aimed at finding a long-term solution to the conflict in Gaza have begun in Cairo, according to Egyptian state media.