The battle in northeast France was the longest of World War I, lasting 300 days, and claimed more than 300,000 lives before France emerged victorious.
Verdun is now seen as a key symbol of the reconciliation of France and Germany and Hollande and Merkel are expected to make a call for Europe to pull together to confront its current challenges.
Under persistent rain, the leaders began the commemoration by laying a wreath at the German military cemetery at Consenvoye, just north of Verdun.
By visiting the German cemetery, Hollande and Merkel were following in the footsteps of their predecessors Francois Mitterrand and Helmut Kohl.
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When Mitterrand and Kohl joined hands there during the playing of the French national anthem in 1984, it underlined how close ties had become between two countries which were once enemies but are now often described as the twin motors of the European Union.
"To be invited to these commemorations shows the extent to which relations between France and Germany are good today," Merkel said ahead of the ceremony.
Hollande said before the ceremony that it was a perfect time for the leaders to spell out their ambitions for Europe, at a time when the continent was in the grip of the "evil of populism".
That appeared to be a reference to Europe's far-right parties which have made advances in several countries, fuelled by growing concern over an unprecedented influx of migrants.
Over lunch, the two leaders will discuss the crisis caused by the hundreds of thousands of migrants and refugees seeking refuge in Europe and the June 23 referendum in Britain on whether or not to quit the EU.
It was here that Mitterrand and Kohl made their symbolic gesture to reaffirm Franco-German friendship.