Setting the tone for tomorrow's formal meeting, Modi and Sharif tonight exchanged pleasantries and chatted briefly when they came face-to-face at a dinner hosted by Russian President Vladimir Putin for leaders of five BRICS countries and 10 SCO nations here.
The two leaders, who are here to attend the Shanghai Cooperation Organisation (SCO) Summit, are expected to discuss the status of the bilateral ties and the future direction.
The confirmation came hours after Foreign Secretary S Jaishankar said that the "possibilities are always there" that the two leaders could meet.
Officials said the two leaders would be reviewing the relationship and all issues could be on the table.
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"Terrorism for India is a major concern," an official said, indicating that the issue could be taken up by Modi at tomorrow's meeting.
In Islamabad, Pakistan Foreign Office spokesman Qazi Khalilullah said bilateral issues of importance will be discussed in the Modi-Sharif meeting.
Indian officials, while insisting that expectations should not be raised on tomorrow's meeting, likened India- Pakistan relations to a cricket match. "You never know how the match will progress till it ends," a senior official said.
The official was commenting while contending that there have been positive gestures in India-Pakistan relations in the recent months, like Modi calling up Sharif to greet him on Ramzan which was followed by release of fishermen by both the countries.
Earlier, Pakistani navy evacuated some Indians from war-torn Yemen while India evacuated some Pakistanis from quake-hit Nepal, he pointed out.
Modi and Sharif were last together in Kathmandu in November last for the SAARC Summit but they did not have a bilateral meeting because of acrimony between the two countries at that time.