The visit on Friday requested by Modi just hours earlier before he flew back home from Afghanistan, raised hopes that stop-and-start negotiations between the nuclear-armed neighbors might finally make progress after three wars and more than 65 years of hostility.
Sharif hugged Modi after he landed at the airport in the eastern city of Lahore and the two left by helicopter for Sharif's nearby family estate.
"So, you have finally come," Sharif told Modi, according to a Pakistani foreign ministry official who was at the meeting, Reuters reports.
"Yes, absolutely. I am here," Modi replied, according to the official.
Modi phoned Sharif earlier in the day to wish him on his birthday and asked if he could make a stop in Pakistan on his way home, Pakistan's top diplomat, Foreign Secretary Aizaz Chaudhry, told reporters.
"And the PM said to him, 'Please come, you are our guest, please come and have tea with me'," he said.
It was Sharif's 66th birthday and the family home was festooned with lights for his grand-daughter's wedding on Saturday. Modi and Sharif talked for about 90 minutes and shared an early evening meal before the Indian leader flew back home.
"Among the decisions taken was that ties between the two countries would be strengthened and also people-to-people contact would be strengthened so that the atmosphere can be created in which the peace process can move forward," Chaudhry said.
The next step will be for the two countries' foreign secretaries to meet in the middle of next month, he added.