India has signed a $1.6bn deal to buy a refurbished aircraft carrier and 12 warplanes from Russia.
Russia is India's largest supplier of military hardware
The agreement was signed in the Indian capital, Delhi, and witnessed by Defence Minister George Fernandes and his Russian counterpart, Sergei Ivanov.
Russia says it will deliver the carrier, the Admiral Gorshkov, by 2008.
Russia is India's largest supplier of military hardware and military co-operation forms a key part of relations between the two countries.
Tuesday's signing ceremony is the high point of a three day visit by Mr Ivanov to India.
Mr Ivanov was unwilling to into details of Tuesday's deal when he spoke to journalists in Delhi.
"Military and technical co-operation is a highly sensitive area and so I am not making any more comment on that," he said.
He did, however, describe the agreement as a "landmark deal".
Mr Fernandes described the signing as a "historic occasion".
The Admiral Gorshkov aircraft carrier is a 29-year-old ship which the Russians took out of service in 1994.
The deal has been criticised over the years by some in India who feel too much is being spent for a relatively old ship.
But last December India's navy chief, Admiral Madhvendra Singh, defended the purchase, saying it would be a "fine deal".
Russia is now committed to giving the Gorshkov a total overhaul. The 12 warplanes included in the deal are MiG-29 fighter jets.
Mr Ivanov said the deal included other "components", although he did not specify what they are.
Some reports say they include helicopters, missiles and electronics systems, the AFP news agency reports.
Last May, the two countries' navies held war exercises in the Arabian Sea, with the aim of consolidating defence relations between the two countries in addition to strengthening Russian presence in the area.
Mr Ivanov's visit to India also includes talks on combating terrorism and nuclear issues.