Iran's President Mahmoud Ahmadinejad is holding talks with United Arab Emirates officials in a milestone visit, the first by an Iranian head of state.
Mahmoud Ahmadinejad travels to the UAE after Dick Cheney
Regional security co-operation and trade were discussed, while energy and Islamic issues were also on the agenda.
The two countries are locked in a long-standing territorial row.
The two-day trip comes a day after a visit by US Vice President Dick Cheney. The UAE is trying to strike a balance in its relations with Iran and the US.
UAE President Sheikh Khalifa bin Zayed al-Nahayan said Abu Dhabi wanted the "elimination of the causes of tension in the Middle East", state news agency WAM reported.
"The international community should take into consideration, when making relevant decisions, the interest of all countries and peoples of the region, in a way that would ensure security... and continued development," Sheikh Khalifa said.
Sheikh Khalifa and top UAE officials greeted Mr Ahmadinejad's arrival amid much fanfare.
It is the first visit of an Iranian head of state since the UAE was formed in 1971.
That year, Iran - then ruled by the Shah - took over the three small islands near the mouth of the Gulf - Abu Mousa, and the Greater and Lesser Tunbs - which were also claimed by two of the UAE's seven sheikhdoms.
The UAE has repeatedly called for direct talks or international mediation to resolve the dispute, but Iran insists it has full sovereignty over the islands and rejects any negotiations.
Despite the political tension, the UAE is Iran's largest trading partner, and both want to keep it that way, says the BBC's Julia Wheeler in Dubai.
Earlier this week, the UAE said it would free 12 detained Iranian divers in an apparent goodwill gesture before the visit.
The divers were detained on 1 May while working on a sunken ship 18 nautical miles off the disputed Abu Musa island.
Mr Cheney visited the UAE as part of a regional tour to rally support from Arab allies and counter Iran's influence in the region.
During the visit he refused to rule out the use of force against Iran over its controversial nuclear programme, which Tehran insists is peaceful and intended solely to produce energy.
Mr Cheney chose a US aircraft carrier in the waters which divide Iran and the UAE from which to warn Tehran that the US and its allies would not let it restrict sea traffic or develop nuclear arms.
There is no doubt the UAE is one of those allies - and its ruling sheikhs will be steering carefully between the viewpoints of their recent and current visitors over the next few days, says our correspondent.