Maithripala Sirisena has held wide-ranging talks with India's Prime Minister Narendra Modi as the newly elected Sri Lankan president continued his first foreign trip since coming to power last month.
The South Asian neighbours, who signed a deal on the nuclear safety on Monday, are seeking to strengthen strategic ties, increase trade and resolve long-standing issues between their nations.
Indian officials said Sirisena's visit indicated the easing of tensions that had crept into the relationship as China made forays into what New Delhi considers an area of influence.
Modi said on Monday that the security and prosperity of the two countries was indivisible and that they were committed to unlocking the potential of their economic co-operation, citing the nuclear agreement that was reached.
"The bilateral agreement on civil nuclear cooperation is yet another demonstration of our mutual trust,'' Modi told journalists soon after his talks with Sirisena.
The nuclear agreement would allow India and Sri Lanka to share expertise on the management of radioactive waste, nuclear disaster mitigation and environmental protection, officials said.
It would also allow the training of Sri Lankans in the use of radioisotopes, nuclear and radiation safety and nuclear security.
in the past, Sri Lankan politicians have raised concerns about the safety of India's Russian-built nuclear power plants in Tamil Nadu state, near Sri Lanka.
Over the past decade, India has watched with concern as China pumped billions of dollars into infrastructure projects in Sri Lanka.
Last year, President Xi Jinping became the first Chinese leader to visit Sri Lanka in 28 years as he courted Colombo's support for a maritime trade route.
Sri Lanka also irked New Delhi by allowing two Chinese submarines to dock along its coastline.
The talks between Modi and Sirisena appeared to have put relations between the neighbours back on track, with both leaders agreeing to resolve many of the irritants in their ties.
After the stunning defeat of his predecessor Mahinda Rajapaksha in general elections last month, Sirisena has tried to restore a balance between the two Asian giants, and plans a visit to China soon.
At the talks on Monday, Modi and Sirisena decided on a "constructive and humanitarian" approach to the problems faced by fishermen from both nations, who are often arrested for straying into the other nation's waters.
New Delhi has also been pressing Colombo to speed up reconciliation efforts in Sri Lanka since the end of a civil war in the island nation in 2009.
More than 100,000 Sri Lankans fled to India during the worst of the fighting and many of the refugees are living in camps in Tamil Nadu state.
The refugees return would depend on Sri Lankan efforts at a restoration of trust between Sri Lanka's Sinhala majority and its Tamil minority.
India's President Pranab Mukherjee is expected to host a banquet in honour of his Sri Lankan counterpart later on Monday.
Sirisena was scheduled to travel to the eastern state of Bihar to visit a historical Buddhist shrine in Bodh Gaya on Tuesday before travelling to the southern temple city of Tirupati and returning to his country on Wednesday.