"With respect to the Middle East conflict, our solidarity with Israel also means working to ensure that Israel and Palestine can live side by side in dignity and peace," Gabriel said in a statement released as he departed for the region.
"Only a two-state solution will be sustainable," he said.
Mr Gabriel's visit, his first since becoming foreign minister in January, comes as German concerns about Israeli settlement building have dragged ties to their lowest point in years.
German governments have made strong relations with Israel a top priority ever since World War Two, going to great lengths to make amends for the killing of six million Jews by the Nazis.
Mr Gabriel will visit the Yad Vashem Holocaust memorial on Monday and meet with Israeli Prime Minister Benjamin Netanyahu and Israel and Palestinian government officials, his spokesman Martin Schaefer told reporters on Friday.
"We do not believe that the current situation is sustainable," Mr Schaefer said. "We think it's necessary to make another attempt to revive talks and negotiations in the framework of the Middle East process."
Lack of progress on the Israeli-Palestinian conflict poses a long-term threat to Israel, Norbert Roettgen, head of Germany's parliamentary foreign affairs committee, told broadcaster Deutschlandfunk on Sunday.
He said relations between the two countries remained deep and important, but also cited 'grave differences of opinion'.
"All those who care deeply about Israel ... are sad, even depressed, about how entrenched everything is, and how much Israel is relying on its military-police superiority and is not developing any perspectives for the situation," he said.
Mr Roettgen said Israel was profiting from tensions elsewhere in the region, which had shifted the focus away from the Israeli-Palestinian issue, and in-fighting among Palestinians.
That had short-term security advantages, but the underlying situation was growing worse and more negative, he said, adding, "That is a real threat for Israel in the longer term."
Ms Merkel in March canceled a summit with Mr Netanyahu that was due to occur in Jerusalem in May, and said she was worried that Israel's building of settlements in the occupied West Bank was undermining progress towards a two-state solution.
Peace talks between Israel and the Palestinians have been frozen since 2014 and settlements are one of the most heated issues. Palestinians want the West Bank and East Jerusalem for their own state, along with the Gaza Strip.
Ceremonies took place across Germany over the weekend to mark Holocaust-related events, including the liberation of the women's concentration centre in Ravensbrueck.
A new report issued on anti-Semitism worldwide by the European Jewish Congress said many members of Jewish communities in Germany still perceived anti-Semitism as a major threat, despite a drop in such incidents in official statistics.
An estimated 250,000 to 500,000 Jews live in Germany, and attitudes toward Jews have improved dramatically since the 1990s. However the new report said growing extreme right-wing and populist movements were fueling open anti-Semitism.
(Editing by Jeremy Gaunt and Jason Neely)