"We have found a way to discuss various, sometimes critical, matters openly. Sometimes it is a great joy, sometimes a challenge."
Despite displays of good humour in their talks, Putin told reporters at a joint news conference afterwards that Russian-German relations under his successor Medvedev would remain the same.
"I do not think our partners will have it easier with him," he said, refering to Medvedev.
Before the visit, Ulrich Wilhelm, Merkel's spokesman told reporters in Berlin that discussions would focus on energy, Russian's recent elections, and issues including Kosovo's status and the situation in the Middle East.
Wilhelm said that Merkel would continue her critical stance regarding human rights and the need for a strong civil society in Russia.
"The chancellor will surely raise ... the conduct of the election, which we view critically," Wilhelm said.
Putin has said the election was held in strict accordance with the Russian constitution.
Putin also said his successor would have to decide whether to pardon jailed oil tycoon Mikhail Khodorkovsky.
When asked by a reporter whether Khodorkovsky would be pardoned by Medvedev, Putin said: "As far as individuals charged in previous years are concerned, if all the necessary procedures are observed, the question of pardoning is in the competence of the head of state, the president of the Russian Federation."
The Kremlin said discussions would focus on economic ties and joint projects in the energy sphere, particularly the prospective $7.3bn Nord Stream undersea pipeline from Russia under the Baltic Sea to Germany.
The pipeline is expected carry 55 billion cubic metres of gas annually from the northwestern Russian port of Vyborg to the northern German port of Greifswald, bypassing current routes through Poland, Belarus and Ukraine.
The relationship between Medvedev and Merkel, who previously met at a 2006 trade fair in Hanover, is likely to play a key role in relations between the two countries and with the EU.
Merkel, who has in the past criticised Putin over human rights, has also sought to boost trade with Russia's booming economy and to mediate between Moscow, Washington and Russia's EU partners.