Chavez greeted Medvedev at an elaborate event in the Venezuelan capital on Wednesday.
The welcoming ceremony featured scarlet-clad soldiers carrying spears, in a courtyard decorated with palm trees, fountains and statues of classical gods and dolphins.
Following talks between the two men, Medvedev said military co-operation between the two countries would continue.
Russia has been a major arms supplier to Venezuela, providing radars, fighter jets, helicopters and tens of thousands of Kalashnikov rifles.
Medvedev defended the arms sales, which have been criticised by the US and Colombia as potentially destabilising for the region.
The Russian president said military co-operation with Venezuela "is not a market relationship or aimed at any other state but is based on partnership... It should strengthen multi-polarity in the world including in South America and Latin America".
Meanwhile, Chavez said US "hegemony" was the source of global "catastrophes".
He denounced what he called the "dictatorship of the dollar" and announced efforts to move away from dollar transactions in future trade deals with Russia.
"We should fight to make a world of catastrophes caused by hegemony and unilateralism a thing of the past," Chavez said.
Medvedev and Chavez went on to dine with leaders of several South and Central American countries, some of which have formed an economic group designed to counterbalance US influence in the region.
Medvedev is set to inspect Russian warships that arrived in Venezuela this week to carry out exercises in the Caribbean Sea close to US waters.
His visit is part of a tour aimed at revitalising Russia's Cold War-era ties with left-leaning countries in Latin America and is seen as a counter to US moves in Eastern Europe where Washington is introducing a missile defence system.
Medvedev earlier visited Brazil, which announced it had agreed to buy 12 attack helicopters from Russia.