Any peace talks would be held under the "one-China policy", Mr Wen said
China is ready to talk to Taiwan about ending hostilities, Chinese Premier Wen Jiabao has said at the start of the annual session of China's parliament.
Mr Wen said China was ready to "create conditions for ending the state of hostility" with the island.
Beijing claims sovereignty over Taiwan, which split from the mainland at the end of the Chinese civil war in 1949.
Relations between the two have improved since last year when a new president, Ma Ying-jeou, was elected in Taiwan.
In the past, Beijing has threatened to use force to bring the self-governed island under mainland rule if it declared formal independence.
"Cross-strait relations have embarked on the track of peaceful development," Mr Wen said.
"We are also ready to hold talks on cross-strait political and military issues and create conditions for ending the state of hostility and concluding a peace agreement between the two sides of the Taiwan Strait."
Mr Wen said any talks would be on the basis of the "one-China principle".
Relations reached a low point under Mr Ma's predecessor Chen Shui-bian, when China conducted military exercises on its coast near Taiwan and positioned hundreds of short-range missiles aimed at the island.
The missiles are still there, but as ties have improved under Mr Ma, economic co-operation has improved and direct flights between Taiwan and the mainland have begun. Previously, travellers had to fly via Hong Kong.
Reacting to Mr Wen's overture, Taiwan's government said it would prefer to negotiate economic deals before political ones.
"A peace deal has advantages for both sides," said Tony Wang, spokesman for President Ma.
"But our thought is first to seek economic deals and political ones later," Reuters news agency quoted him as saying.