Millions of pounds are to be invested in new bilateral economic, high-tech and scientific projects, it has been revealed.
Prime ministers David Cameron and Benjamin Netanyahu announced at least £3 million of funding for the schemes following talks in London on Thursday .
There will be new co-operation in cyber security, science research and medical work.
Following a meeting at Number 10, a Downing Street spokesman said the two leaders had discussed the progress made on economic ties between the countries since Mr Cameron’s visit to Jerusalem last year.
“They agreed that cyber security was a vital issue, and that it had to be considered both in terms of threats and opportunities,” the spokesman said.
Britain will send a cyber business delegation to Israel in December.
The spokesman added: “On the Middle East, both leaders reiterated their commitment to a two-state resolution as the only way to secure lasting peace in the Middle East.”
Mr Cameron told his opposite number that it was important to improve daily life for people in Gaza, through better power and water supplies and increased travel in and out of the Gaza Strip.
The spokesman said there had been further discussions on Islamist extremism and the men had “agreed that both political and economic security was required for long-term peace.
“On Iran, they recognised that while there were differences in their approach, both shared the objective of greater stability in the region, and agreed that it was in the interests of all that Iran allowed regular inspections of its nuclear facilities.”
Following his meeting at Number 10, Mr Netanyahu met members of the parliamentary Friends of Israel groups.
He told them: “I’m willing right now, without any preconditions, any preconditions whatsoever, to sit down with President Abbas and negotiate this peace.”
He said he was prepared to go to Ramallah, in the West Bank, or President Abbas could come to Jerusalem. “Whatever. Anytime, anywhere, now, without preconditions."
Around 120 MPs, from all parties, and members of the House of Lords attended the meeting.
