On arrival, the pontiff was greeted by Palestinian President Yasser Arafat and given a bowl of earth which he kissed, an act seen by Palestinians as a papal seal for their aspirations for statehood.
The Pope traditionally kisses the earth during state visits.
In an itinerary heavy with political and religious symbolism, he will also hold talks with Mr Arafat and tour a Palestinian refugee camp.
Earlier, he sent a telegram to Mr Arafat, saying: "In eager anticipation of my visit to Bethlehem and the Palestinian territories I ask Almighty God to bless the Palestinian people and to strengthen in all the peoples of the Middle East the resolve to bring about a just and stable peace in the region."
Mr Arafat called the visit "an international signal for the whole world".
Memorial
On Wednesday morning, the Pope left Jerusalem for Qasr el Yahud for a private visit to the site on the west bank of the River Jordan where Israel says Jesus was baptised.
On Tuesday, he visited the place on the east bank which Jordan
claims as the baptism site. Click here for sacred sites on the Papal tour
While in Bethlehem, which has been decked out with Palestinian and Vatican flags, he will hold a mass for 20,000 believers in Manger Square and visit the Church of the Nativity.
"It is a declaration and not just a hint that the Pope
realises that the issue of refugees needs to be solved," said
Mohammed al-Laham, head of a Palestinian committee in charge of
preparations for the papal visit to Dheisheh.
BBC Jerusalem correspondent Paul Adams says that the Pope will choose his words carefully in the sure knowledge that Israelis and Palestinians are looking to exploit what he says to support their rival claims.
Holy city
On Tuesday, the Pope arrived in Tel Aviv from Jordan, and was welcomed by Israeli President Ezer Weizman and Prime Minister Ehud Barak.
He touched his lips to a bowl of Israeli soil carried by three children - a Christian, a Muslim and a Jew - and repeated his call for reconciliation.
"May peace be God's gift to the land he chose as His own," the 79-year old pontiff said.
"We appreciate your role in condemning anti-Semitism as a sin against heaven and humanity and we appreciate that you have also asked for a pardon for the crimes committed against the Jewish
people in the name of the Catholic Church," he said.
Soon after arriving, the Pope went by helicopter to Jerusalem.
The Vatican, which only recognised the state of Israel in 1994, does not recognise its claims over east Jerusalem, which the Jewish
state captured and annexed in 1967.
At the refugee camp of Dheisheh, the Pope will visit a memorial honouring refugees killed in
the Israeli-Palestinian conflict.
In a welcoming speech, President Weizman paid tribute to the Pope's struggle against anti-Semitism.
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Holy Land's Christians under pressure
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Flashback: 1964 papal visit
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Pope pleads for Middle East unity
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Swastika protest heralds papal visit
(19 Mar 00 | Middle East)
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(21 Mar 00 | Middle East)
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