Modi is in China for the first time in seven years to attend a two-day meeting of the Shanghai Cooperation Organisation, along with Russian President Vladimir Putin and other leaders from Central, South and Southeast Asia and the Middle East, in a show of global south solidarity.
"We are committed to progressing our relations based on mutual respect, trust and sensitivities," Modi told Xi during the meeting on the sidelines of the summit on Sunday, according to a video clip posted on the Indian leader's official X account.
The bilateral meeting took place five days after Washington imposed punishing 50 per cent tariffs on Indian goods due to New Delhi's purchases of Russian oil.
Analysts say Xi and Modi are looking to present a united front against Western pressure.
Modi said an atmosphere of "peace and stability" has been created on their disputed Himalayan border, the site of a prolonged military stand-off after deadly troop clashes in 2020, which froze most areas of co-operation between the nuclear-armed strategic rivals.
He added that an agreement had been reached between both nations regarding border management, without giving details.
"We must ... not let the border issue define the overall China-India relationship," Chinese state media outlet Xinhua reported Xi as saying.
China-India ties could be "stable and far-reaching" if both sides focused on viewing each other as partners instead of rivals, Xi said.
Both leaders had a breakthrough meeting in Russia in 2024 after reaching a border patrol agreement, setting off a tentative thaw in ties that has accelerated in recent weeks as New Delhi seeks to hedge against renewed tariff threats from Washington.
Direct flights between both nations, which have been suspended since 2020, are "being resumed", Modi said, without providing a time frame.
China had agreed to lift export curbs on rare earths, fertilisers and tunnel boring machines in August during a key visit to India by China's Foreign Minister Wang Yi.
China opposes Washington's steep tariffs on India and will "firmly stand with India", Chinese Ambassador to India Xu Feihong said in August.
For decades, Washington painstakingly cultivated ties with New Delhi in the hope it would act as a regional counterweight to Beijing.
In recent months, China has allowed Indian pilgrims to visit Buddhist sites in Tibet, and both countries have lifted reciprocal tourist visa restrictions.
"Both India and China are engaged in what is likely to be a lengthy and fraught process of defining a new equilibrium in the relationship," said Manoj Kewalramani, a Sino-Indian relations expert at the Takshashila Institution think tank in Bengaluru.
However, other long-term irritants remain in the relationship.
China is India's largest bilateral trade partner, but the long-running trade deficit - a persistent source of frustration for Indian officials - reached a record $US99.2 billion ($A151.7 billion) this year.
Meanwhile, a planned Chinese mega-dam in Tibet has sparked fears of mass water diversion that could reduce water flows on the major Brahmaputra River by up to 85 per cent in the dry season, according to Indian government estimates.
India also hosts the Dalai Lama, the exiled Tibetan Buddhist spiritual leader whom Beijing views as a dangerous separatist influence.
India's arch-rival Pakistan also benefits from staunch Chinese economic, diplomatic and military support.
