Morocco and the Polisario fought for control of Western Sahara from 1974 to 1991, when Rabat took over the desert territory before the signing of a UN-brokered ceasefire.
Morocco says Western Sahara is an integral part of the kingdom, but in 2007 proposed autonomy for the former Spanish colony, which is home to large phosphate reserves.
The Algeria-backed Polisario Front campaigns for independence and demands a referendum on self-determination for the desert territory of half a million residents.
Koehler, a former German president tasked in August by the United Nations to mediate between Morocco and the Polisario, was also set to visit Algeria and Mauritania.
On Monday, he held talks in Rabat with Moroccan Foreign Minister Nasser Bourita, according to a diplomatic source. The talks are set to continue Tuesday before Koehler leaves Wednesday morning for the Tindouf region.
Tindouf is an area in southwest Algeria that is home to refugee camps where between 100,000 and 200,000 people live. Koehler is expected to meet some refugees and hold a closed-door meeting with Polisario officials, Sahrawi sources in Algiers said.
The envoy will report back to the UN Security Council on October 24 on prospects to re-starting talks between Rabat and the Polisario to resolve the decades-old conflict over Western Sahara.
The United Nations opened negotiations between Morocco and the Polisario in 2007 and there have been several rounds since, with the latest held outside of New York in 2012.
But there has been little progress since, with attempts to re-start talks on the future of the disputed territory exacerbated by tensions on the ground.
– Tensions and hurdles –
In April, the United Nations said it was keen on resuming negotiations between both sides after the Polisario pulled back fighters from Guerguerat, a zone of tensions on the border with Mauritania.
The Security Council adopted a resolution calling for a new UN push for talks and extended by a year the mandate of its MINURSO peacekeeping mission.
The 450-strong MINURSO is comprised mostly of military observers monitoring a 1991 ceasefire between Morocco and the Polisario.
The peacekeeping force — whose ties with Rabat are strained — is based in Laayoune, the main city of Western Sahara, but Koehler is not expected to visit the troops.
Koehler, 74, is a former International Monetary Fund chief and served as president of the European Bank for Reconstruction and Development.
One of the hurdles to restarting peace talks was cleared when UN envoy Christopher Ross, a veteran American diplomat accused by Rabat of bias in favour of the Polisario, resigned in March after an eight-year stint.
The Western Sahara covers 266,000 square kilometres (103,000 square miles) along the Atlantic coast.
Morocco has built six mostly sand barriers along roughly 2,700 kilometres to cordon off the part of the territory it controls.
Western Sahara is the only territory on the African continent whose post-colonial status has still not been resolved.
The dispute continues to poison relations between Morocco and Algeria, whose borders have been closed since 1994.