Accompanied by Sri Lanka's President, Maithripala Sirisena, Prime Minister Narendra Modi arrived here and offered prayers at the sacred Sri Maha Bodhi tree.
He also stopped at the Buddhist temple in the historic north-central city.
Worshippers believe that the Sri Maha Bodhi Tree has grown from a sapling from one that sheltered the Buddha over 2,500 years ago.
Prime Minister Modi will also visit the north-western town of Talaimannar, the closest point to India, to flag off a train service restored after decades of war, and Jaffna.
Modi will be only the second foreign leader to visit the battle-scarred region to launch the construction of a cultural centre and to hand over houses to 50,000 families who lost their homes in the decades of fighting.
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British Prime Minister David Cameron visited Jaffna during a Commonwealth summit in Colombo in November 2013.
Modi will become the first Indian prime minister to visit Sri Lanka's Tamil heartland.
On Friday, he asked the Government of Sri Lanka to reach out to its Tamil minority and outlined his determination to build a stronger economic relationship with Colombo.
He also described the LTTE as terrorists.
Modi said all countries in South Asia have to deal with the "issues of identities and inclusion, of rights and claims, of dignity and opportunity for different sections of our societies".
He said such issues have sometimes had tragic consequences. "Each of us has sought to address these complex issues in our own ways. However, we choose to reconcile them. To me, something is obvious: Diversity can be a source of strength for nations.
