Both Israel and Scotland are currently without a manager after failed qualifying campaigns which saw both countries miss out on this summer’s World Cup in Russia.
Drawn in Group One of League C, the first group games take place in September this year, with the finals scheduled for June 2019.
Reflecting on the draw, Israel FA chairman Ofer Eini remarked: "It's a new tournament that brings new opportunities. We are looking to achieve two main things – professional success and strengthening the connection between the national team and the fans."
Brighton striker Tomer Hemed believes the new competition will benefit the national side. He said: "This provides another opportunity for the Israel team to qualify for Euro 2020 and we must welcome that. We will have to give everything and it's clear that both Scotland and Albania are stronger teams than us, so we will have to improve."
Israel's captain and former Premier League star Tal Ben Haim said, "It's a new format without teams at the extremes like Spain and Andorra.
It'll be very tight and evenly balanced and that creates a challenging and interesting tournament."
Scotland have never lost against Israel, having played on three occasions in the 1980s. The two sides last met in 1986, when a solitary Paul McStay goal was enough to secure the victory.
Centre half Christophe Berra told the Scottish FA website: "A lot of the squad won’t even have been born when we last played Israel, so it provides new competition for us all."