Eritrea's President Isaias Afwerki is visiting Ethiopia for the first time since the start of the two countries' border war in 1998.
The three-day visit aims to cement ties just days after the two neighbours declared their "state of war" over.
Mr Afwerki was welcomed on arrival by Ethiopia's Prime Minister Abiy Ahmed.
Thousands of people, many waving Eritrean flags, lined the streets of the Ethiopian capital, Addis Ababa, to mark the historic visit on Saturday.
Mr Afwerki, whose visit is the latest in a string of moves towards reconciliation between Africa's erstwhile bitter enemies, was also greeted by dozens of traditional Ethiopian dancers while a brass band performed for him as he walked the red carpet.
Along the main road from the airport, thousands of Ethiopians gathered to celebrate with both Ethiopian and Eritrean flags waved side-by-side.
Speaking at a lunch hosted by Mr Abiy, Mr Afwerki said history was being made following an agreement that will see diplomatic and trade relations restored and lead to the resumption of flights between the two countries.
"Words cannot express the joy we are feeling now," he said.
Last week Mr Abiy travelled to Eritrea's capital, Asmara, where the two leaders signed a pact formally ending the state of war while agreeing to re-establish diplomatic and trade ties after two decades of hostility.
Since taking office in Ethiopia in April, Mr Abiy has announced a series of reforms, and spoken of mending ties with Eritrea.