The Queen has described the UK and Brazil as "good friends and allies" at a banquet to welcome the Brazilian president for a three-day state visit.
The visit will combine political meetings with state functions
At Buckingham Palace, President Luiz Inacio Lula da Silva also hailed the "deeply-rooted historical friendship".
The president and Tony Blair hold talks on Thursday likely to cover the police shooting of Brazilian Jean Charles de Menezes in London on 22 July last year.
The Crown Prosecution Service is considering whether to charge officers.
Metropolitan Police Commissioner Sir Ian Blair, whose conduct following the shooting is being probed by the Independent Police Complaints Commission (IPCC), was present at the banquet.
Other guests included Mr Blair and his wife Cherie, the Prince of Wales, the Duke of York, the Earl and Countess of Wessex, and the Princess Royal.
The Queen told President Lula: "Your visit allows us to draw attention to the excellent relationship at all levels and in all walks of life between the United Kingdom and Brazil.
"Our friendship which we celebrate this evening is of great importance to us now and will be of increasing consequence to the people of both our countries in the future."
President Lula responded: "Britain's hospitality has attracted many Brazilians to the United Kingdom.
"Workers, students, intellectuals and artists... have found safe haven here, as well as new opportunities to learn, create and achieve."
He added: "Their dedication, professionalism and personal sacrifices have also helped build this country's future."
The president earlier reviewed a guard of honour at Horseguards Parade before joining the Queen for a carriage procession to Buckingham Palace.
An exhibition of Brazilian memorabilia is currently being shown at the palace.
The state visit is expected to include high-level political and business meetings as well as cultural trips and state functions.
British officials have sought to play down the rift caused by last year's police shooting of Mr Menezes.
The Brazilian government has expressed concern that the dead man's family has not seen the report into the killing by the IPCC.
Mr Menezes was killed after being mistaken for a suicide bomber
Privately, some government officials are among the many Brazilians who say British police officers should face criminal charges.
As the Crown Prosecution Service weighs up the evidence, President Lula must decide whether to see London-based relatives of Mr Menezes who have requested a meeting.
They have repeatedly demanded the resignation of the Metropolitan Police commissioner Sir Ian Blair.