Netanyahu is making the first visit by an Israeli prime minister in 15 years and the nationalist government of Prime Minister Narendra Modi has rolled out the red carpet, seeing Israel as an ally in the fight against terrorism.
Modi hosted the Israeli leader in his home state of Gujarat where hundreds of people waving Indian and Israeli flags lined up the streets as the motorcade passed.
The two men, accompanied by Netanyahu's wife, Sara, went to Gandhi's ashram on the banks of a river where Netanyahu tried his hand at a spinning wheel, a pastime Gandhi made popular while he was jailed during British colonial rule.
"An inspiring visit to the hearth of one of humanity's great prophets of inspiration - Mahatma Gandhi," Netanyahu and his wife wrote in the guest book.
Netanyahu and Modi have pledged to deepen economic and security ties in a more open embrace of the relationship which New Delhi had long kept at a low profile, largely for fear of upsetting Arab nations on which it depends for oil.
Modi said India's cooperation with Israel was diverse and benefited both countries. On Tuesday, Netanyahu said the two countries were discussing ways to strengthen cooperation to fight the menace of radical Islam that they both faced.
On Thursday, Netanyahu will travel to Mumbai to join a memorial event for the parents of an 11-year-old Israeli boy who was among the 166 people killed during an attack by Pakistan-based militants in 2008.
Ahead of that trip, a small group of people staged a protest in Mumbai holding placards denouncing Netanyahu and accusing him of atrocities against Palestinians.
Arabs and Muslims across the Middle East, the European Union and the United Nations have all opposed the U.S. President Donald Trump's recognition of Jerusalem as Israel's capital last month as an incendiary move in a volatile region and Palestinians said Washington was abandoning its leading role as a peace mediator.
Israel, by contrast, applauded Trump's move. Netanyahu said it was "an important step towards peace" and it was "our goal from Israel's first day."