Sharon hailed India as "one of the most important countries in the world" before going into talks in New Delhi on Tuesday.
Indian Prime Minister Atal Behari Vajpayee was equally welcoming.
"We have old relations," Vajpayee told reporters. "A new shape is being given to these relations - it is a historic visit and I am confident it will bring the two countries closer."
Israel has become India's second largest weapons supplier although the two countries only established diplomatic relations 11 years ago.
Round of talks
The Israeli prime minister is scheduled to meet deputy Indian Prime Minister, Lal Krishna Advani, and National Security Adviser, Brajesh Mishra, an architect of New Delhi's warming ties with Israel.
Billion dollar deals:
Three Phalcon airborne warning and control systems to be mounted on Russian IL-76 aircraft. Total cost is estimated at $1.29 billion.
The Arrow anti-ballistic missile system, estimated at $2.5 billion.
Ten Barak anti-missile defence systems in addition to the seven already installed on Indian warships.
An unspecified number of unmanned aerial vehicles. About $142 million has been set aside to buy the drones.
A $105-million deal for electronic warfare systems for battleships. The navy earlier bought three fast patrol boats.
A $30-million deal for 3400 Tavor assault rifles, 300 sniper rifles, night vision devices, concluded this year.
These will be given to about 3000 soldiers of a new Special Forces group trained by Israelis to fight in disputed Kashmir.
Israel has provided avionics and weapons systems for 40 Russian Su-30 fighters that India bought in the mid-1990s. Also upgrading of 125 MiG aircraft.
The two sides are also discussing upgrading the India's MiG-27 jets and British-made Jaguars and Sea Harriers.
A senior official travelling with Sharon's delegation said the once-secretive ties became more open after the 11 September 2001 attacks in the United States.
"There is no doubt the watershed events of 9/11 … have created a new opportunity to create stronger ties between India, Israel and the United States," he said, describing the relationship between them as a "strategic triangle".
Sayyid Ahmad Bukhari, head of Delhi's Jama Masjid, plans to lead a march on Tuesday to the Israeli embassy to denounce Sharon, whom he called "the man behind all the savage and brutal activities of Israel against Palestinian Muslims."
However, Sharon plans to visit the tomb of Mahatma Gandhi, who led India's non-violent but successful independence movement. Various groups have warned they will stage protests against his visit.
A huge security operation in the Indian capital had already been planned for Sharon's visit, with riot-control police stationed at points where demonstrations are most likely.
Historical bad relations
India was for years a critic of Israel, supporting the since-revoked 1975 UN resolution that labelled Zionism a form of racism.
But India forged full diplomatic relations with Tel Aviv in 1992 and since then ties have steadily warmed, with Israel now New Delhi's second largest military supplier after Russia.
Sharon is also leading a 150-member delegation of officials and businesspeople including the chiefs of major Israeli arms firms.
An official with the Israeli delegation said the two countries might in "another couple of weeks" sign a billion-dollar sale to India of the sophisticated Phalcon radar system.
It will not be finalised during Sharon's trip due to "bureaucratic lapses, things that have to be worked out," he said.