The case, brought before a Haifa court by Corrie's family, challenges the official Israeli version of events in which the military said its troops were not to blame. The family hopes the hearing will be a chance to put on public record the events that led to their daughter's death in March 2003. If the Israeli state is found responsible, the family will press for at least $300,000 (£201,000) in damages.
Before the hearing began, Craig Corrie, Rachel's father, said the family had been on a "seven-year search for justice in Rachel's name".
"I think when the truth comes out about Rachel, the truth will not wound Israel, the truth is the start of making us heal," he said.
Cindy Corrie, Rachel's mother, said the family was still waiting for the credible, transparent investigation Israel first promised into her daughter's death.
"I just want to say to Rachel that our family is here today trying to just do right by her and I hope that she will be very proud of the effort we are making," she said.
The family's lawyer, Hussein Abu Hussein, will argue that witness evidence shows the soldiers saw Corrie at the scene, with other activists, well before the incident and could have arrested her or removed her from the area before there was any risk of her being killed.
He will argue her death was either due to gross negligence by the Israeli authorities or was intentional.
Four key witnesses – three Britons and an American – who were at the scene in Rafah when Corrie was killed are to give evidence.
The first witness to give evidence was Richard Purssell, a Briton who was an ISM volunteer along with Corrie. He described how he had gone to Gaza to see the situation for himself and to prevent the Israeli military from demolishing Palestinian houses.
He said the ISM told him it was a strictly non-violent organisation. "Our role was to support Palestinian non-violent resistance."
He briefly described the moment Corrie was killed. "Rachel disappeared inside the earth and the bulldozer continued for 4 metres and then reversed," he told the court.
Corrie, who was born in Olympia, Washington, travelled to Gaza to act as a human shield at a moment of intense conflict between the Israeli military and the Palestinians.
On the day she died, when she was just 23, she was dressed in a fluorescent orange vest and was trying to stop the demolition of a Palestinian home in Rafah. She was crushed under a military Caterpillar D9R bulldozer and died shortly afterwards.
A month after her death the Israeli military said an investigation had determined its troops were not to blame and said the driver of the bulldozer had not seen her and did not intentionally run her over.
Instead, it accused her and the group she was with, the International Solidarity Movement (ISM), of behaviour that was "illegal, irresponsible and dangerous."
The army report, obtained by the Guardian in April 2003, said she "was struck as she stood behind a mound of earth that was created by an engineering vehicle operating in the area and she was hidden from the view of the vehicle's operator who continued with his work. Corrie was struck by dirt and a slab of concrete resulting in her death."
But several witnesses offered a different version of events, saying the driver had seen her but continued anyway, hitting her with the bulldozer blade. She was severely injured and died shortly afterwards in an ambulance.
While Corrie was in the Palestinian territories, she wrote vividly about her experiences. Her diaries were later turned into a play, My Name is Rachel Corrie, which has toured internationally, including in Israel and the West Bank.