Paintings by Chagall, Rodin, Matisse and others were among 1,400 artworks found at Cornelius Gurlitt's Munich home.
Under a new agreement, Israel and Germany will cooperate on museum research to establish the owners of Jewish-owned art stolen by the Nazis, AFP reports.
Culture and Sports Ministry director general Orly Froman and German Culture Minister Monika Gruetters signed the agreement on Sunday, officials said. Under the accord, German and Israeli experts will go through training, and will set up join databases.
"The cooperation between German and Israeli institutions on provenance research of Nazi-confiscated art and Judaica is a great vote of confidence," AFP cited Gruetters as saying in a statement.
Culture and Sports Minister Limor Livnat said in a statement that the agreement could result in looted art being returned to its original Jewish owners, AFP said.
She also mentioned the existing cooperation between the two countries on Nazi-looted art. This includes two Israeli curators who are on a German committee that is establishing the ownership of the art collection found in the apartment of Cornelius Gurlitt in Munich.
Gurlitt, the son of an art dealer, had stored a collection valued at hundreds of millions of dollars in his apartment. He died last month aged 81. Before he died, he made a deal with Germany to help find the original owners of the pieces.