The singer dedicated her track 'Masterpiece' to her fellow New Yorker during her show at the Boardwalk Hall in Atlantic City on Saturday night (September 15).
"I'm going to dedicate this next song to Lady GaGa," Madonna said while sipping her drink. "Do you want to know something? I love, I love her.
"I do love her - imitation is the highest form of flattery. One day, very soon, we're going to be on stage together. Do you think I'm kidding?"
The pair have been locked in an ongoing feud since Madonna claimed Lady GaGa copied her hit 'Express Yourself' when writing her 2011 single 'Born This Way'.
Madonna has included a mashup of the two songs on the setlist for her current MDNA world tour.
Watch Madonna dedicate 'Masterpiece' to Lady GaGa below (starts at 5 mins 58 secs):