Modi, dressed in traditional Mongolian attire and sporting a hat, attended the festival with Premier Chimed Saikhanbileg.
Prime Minister Modi drove to an open area in Chinggis Khuree near the airport here and spent about an hour watching horse racing, traditional wrestling and archery.
He also tried his hand at archery.
Mongolian Premier Saikhanbileg also gifted a Mongolian race horse named 'Kanthaka' to Prime Minister Modi.
The Naadam festival is also locally termed "eriin gurvan naadam" (the three games of men). The games are Mongolian wrestling, horse racing and archery and are held throughout the country during midsummer.
In 2010, Naadam was inscribed on the Representative List of the Intangible Cultural Heritage of Humanity of UNESCO.