Putin arrived in Turkey accompanied by a large delegation, including 10 ministers, for discussions officials say will concentrate on trade, including a Turkish demand for a price reduction on natural gas purchases from Russia.
The two countries, who are major trading partners, have set an aim of increasing their two-way trade volume from the current USD 33 billion to USD 100 billion by 2020.
The Russian and Turkish leaders, often compared to each other for their drift toward authoritarianism, have opposing positions on Syria's crisis.
Russia remains Syrian leader Bashar Assad's closest ally while Turkey supports Syria's opposition forces and Erdogan makes no secret of his desire to see Assad deposed.
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Turkey has expressed concerns over Russia's annexation of Crimea. Turks have ethnic ties to the Crimean Tatars in the region and Turkey has pledged to defend their rights.
Putin is the second foreign dignitary to receive an official welcome at the palace, after Pope Francis who visited on Friday.