Obasanjo left Goma, capital of North Kivu province, by helicopter on Sunday morning, and is set to meet the renegade general around 60 km southeast of the village of Ndeko, where some of the worst fighting has been seen.
The envoy said the main aim of the meeting is to find out exactly what the rebel leader wants.
United Nations peacekeeping spokesman Col. Jean-Paul Dietrich said heavy gunbattles broke out early on Sunday morning in the village. Artillery and rocket blasts could be heard from the surrounding area.
Last week, the UN Security Council failed to reach a decision on sending additional peacekeepers to the Democratic Republic of Congo.
The UN currently has 17,000 peacekeepers serving as part of the Congo mission known as Monuc, the world's largest peacekeeping force.
Dietrich said on Tuesday that Congolese army troops had plundered villages in eastern Congo, looting houses and raping civilians as they retreated from Nkunda's rebel forces.
The Security Council had met to discuss a request from Secretary-General Ban Ki-moon for around 3,000 more peacekeepers and police.
Ban said he was "very concerned by reports of targeted killings of civilians, looting and rape," and that the "situation has grown increasingly desperate."
An estimated 250,000 people have been left homeless in over 10 weeks of fighting between army and rebel troops.
