Once-close relations between the two nations fell apart after Israeli commandos killed nine Turkish nationals during a botched pre-dawn raid on a six-ship flotilla seeking to break Israel's naval blockade on Gaza in May 2010.
The assault provoked a major diplomatic crisis between the former regional allies, with Ankara demanding a formal apology and compensation for the families of the victims.
Talks finally began in March 2013 after Israel extended a formal apology to Turkey to get relations back on track following to-level intervention by US President Barack Obama.
The talks stalled for several months but were revived in December when Israeli negotiators travelled to Istanbul and Turkey lowered its demands for compensation, Haaretz said.
Western diplomats quoted by the paper said Ankara had demanded $30 million, but Israel was initially willing to give only $15 million.
Voice of Russia, AFP