Koehler, a former German president tasked by the United Nations in August with mediating the decades-old dispute, sat down with leaders from the pro-independence Polisario Front as he made his first trip to the refugee camps in Algeria where they are based.
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The meeting is part of a fresh push by the United Nations to try to resolve one of Africa's longest-running territorial disputes, which saw the Polisario Front wage a bitter 16-year insurgency against Moroccan control.
A UN-brokered ceasefire in 1991 halted the fighting, but Morocco insists the phosphate-rich region is an integral part of its kingdom. An envisioned referendum on independence has never been held.
The Algeria-backed Polisario Front campaigns to be to split the territory from Morocco and demands a vote on self-determination for the desert territory of half a million residents.
The UN opened negotiations between Morocco and the Polisario in 2007, when Rabat proposed autonomy for the former Spanish colony, but there has been little progress since.
In April, the UN said it wanted to resume negotiations after Polisario fighters withdrew from a sensitive area on the border with Mauritania, appearing to offer a chink of hope.
"I came to listen to both sides of the conflict, to see firsthand the conditions in the refugee camps and to better understand the issue and more importantly to form my personal vision," Koehler said in a brief statement before the meeting.
While the new envoy expressed his optimism over future negotiations, he remained sanguine about the task ahead.
"I am not a magician," he said.
His visit to the Tindouf area in southwest Algeria, the location of refugee camps that are home to between 100,000 and 200,000 people, came a day after Koehler met Morocco's King Mohammed VI.
Western Sahara is the only territory on the African continent whose post-colonial status has still not been resolved.
The conflict continues to poison relations between Morocco and Algeria, whose borders have been closed since 1994.
Located on the Atlantic coast, the Western Sahara covers 266,000 square kilometres (103,000 square miles).
Morocco has built six mostly sand barriers along roughly 2,700 kilometres (1,675 miles) to cordon off areas of the territory it controls.
Koehler is set to meet Thursday with peacekeepers from the UN mission overseeing the ceasefire since 1991, before heading to meet Algerian and Mauritanian officials.
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