PANAMA CITY (AFP) - Presidents Barack Obama and Raul Castro are expected to hold talks on Saturday, a US official said, raising the prospect of the first substantive meeting between an American and Cuban leader in more than five decades.

Obama and Castro are in Panama for the two-day Summit of the Americas, Cuba's first, raising expectations of a landmark follow-up to their historic announcement on Dec 17 that their countries would restore ties severed since 1961.

"We certainly do anticipate that they will have the opportunity to see each other at the summit tomorrow," senior Obama advisor Ben Rhodes told reporters Friday.

"We do expect (them to have) a discussion tomorrow."

He said the extent of the meeting had yet to be decided, but that the two leaders "will be able to take stock" of the negotiations to normalise relations and reopen embassies, as well as discuss lingering "differences."

The meeting will be the first since Obama and Castro briefly shook hands at Nelson Mandela's funeral in December 2013.

An actual discussion would be the first substantive talks between US and Cuban leaders since 1956, when President Dwight Eisenhower met dictator Fulgencio Batista, who was toppled by Fidel Castro three years later.

That meeting also happened in Panama.

Rhodes said Obama and Castro had already discussed the ongoing negotiations and the upcoming summit by telephone Wednesday - their first phone call since December, just before they announced the game-changing diplomatic thaw.

But he said there was no decision yet on one of the key obstacles in the negotiations, Cuba's presence on the US blacklist of state sponsors of terrorism.

"I'm not ruling out any announcement but ... we are not there yet in terms of a final recommendation being made to the President, and the President making a determination," he said.

Cuba's presence on the blacklist - which also includes Iran, Syria and Sudan - has been a major sticking point in negotiations to reopen embassies.

Cuba was first put on the list in 1982 for harbouring Basque separatist militants and Colombian FARC rebels, restricting the country's access to global bank credit.

If and when Obama decides Cuba should be removed from the list, Congress will have 45 days to decide whether to override his recommendation.

US lawmakers who have been critical of the diplomatic detente could seize on the review of the list to further attack Obama's Cuba policy.

STICKING POINTS

Some 30 leaders will gather from Friday evening at the summit, posing for pictures and sitting down for a seaside dinner in a complex of ruins from the era of the Spanish conquistadors.

Obama began his day with a visit to the Panama Canal, where, jacket slung over his shoulder in the tropical heat, he toured a command centre and walked across the Miraflores locks, at the Pacific entrance to the interoceanic waterway.

The US and Cuban chief diplomats, Secretary of State John Kerry and Foreign Minister Bruno Rodriguez, made history themselves Thursday evening when they held talks - the first such meeting since 1958, a year before Fidel Castro's revolutionary guerrillas seized power.

Both sides said the nearly three-hour talks were "constructive" and would be followed by further conversations to resolve outstanding issues.

Cuba has other major demands, most importantly that the US Congress lift an embargo that the communist regime blames for the island's economic troubles.

Washington wants Cuba to lift restrictions on the movement of its diplomats on the island, giving them unfettered access to ordinary Cubans.

The reconciliation appears popular in both countries.

A Marist College poll showed this week that 59 per cent of Americans back the diplomatic thaw, while a survey by US pollster Bendixen & Amandi International in Cuba found that 97 per cent of islanders are in favour.

But Cuban government supporters confronted dissidents on the sidelines of the summit, heckling them as they attended a civil society forum.

And even as Obama moves to remove an old source of tension in US relations with Latin America, a new headache has emerged since he imposed sanctions against Venezuelan officials accused of human rights abuses in an opposition crackdown.

Venezuelan President Nicolas Maduro, Havana's main ally in the region, said Thursday he had gathered 13.4 million signatures in a petition urging Obama to lift his executive order.