Speaking to reporters after about four hours of talks with Israeli Prime Minister Benjamin Netanyahu, Kerry said he thought there were steps that could reduce the violence and said they needed to be discussed with Jordanian and Palestinian officials.
"I would characterize that conversation as one that gave me a cautious measure of optimism that there may be ... a way to defuse the situation and begin to find a way forward," Kerry told reporters after he met Netanyahu at a Berlin hotel.
"If parties want to try, and I believe they do, want to move to a de-escalation, there are a set of choices that are available," he told a joint news conference with German Foreign Minister Frank-Walter Steinmeier.
At a United Nations Security Council meeting on October 22, Israeli Ambassador Danny Danon said peace could only be achieved through direct talks between the parties.
He called on the international community to urge Palestinian President Mahmoud Abbas to accept an invitation from Netanyahu to meet.
Palestinian Foreign Minister Riad al-Malki said he would never dismiss the possibility of a meeting if it could help de-escalate the violence.
But he added that Netanyahu would first have to "end his own incitement" and withdraw Israeli troops from the occupied Palestinian territories.
Nine Israelis have been killed in Palestinian stabbings, shootings and vehicle attacks since the start of October. Forty-nine Palestinians, including 25 assailants, among them children, have been killed in attacks and during anti-Israeli protests.
Among the causes of the turmoil is Palestinians' anger at what they see as Jewish encroachment on the al-Aqsa mosque compound in Jerusalem's Old City, Islam's holiest site outside Saudi Arabia, which is also revered by Jews as the location of two ancient temples.
The area, also home to the Dome of the Rock, is known to Muslims as the Noble Sanctuary and to Jews as the Temple Mount.