"I'm concerned that some of the weaponry that we are currently giving to Egypt may one day be used against Israel," he said.
Most American military assistance to Israel must be spent on U.S.-made equipment, providing a boost to the military industry there.
Paul suggested Israel would actually benefit from less aid, saying it would enhance its sovereignty by not having to approach the U.S. "on bended knee" when making its own decisions.
"I don't think you need to call me on the phone to ask permission for what you want to do to stop missiles from raining down on you from Gaza," he said.
Paul, the son of former presidential candidate Ron Paul, is mentioned as a potential presidential contender in 2016.
A member of the Senate Foreign Relations Committee, Paul is scheduled to meet with Netanyahu, President Shimon Peres and other Israeli leaders before heading off for meetings in Jordan and the Palestinian Authority.