The Queen has said Britain and Saudi Arabia must work together against terrorists "who threaten the way of life of our citizens".
At a state banquet hosted by the Queen, King Abdullah of Saudi Arabia spoke of "ominous signs of war and conflict in the world".
He called on Muslims in the UK to be honest and upright Muslims and worthy British citizens.
The last visit by a Saudi king to the UK was 20 years ago.
Prime Minister Gordon Brown and Tory leader David Cameron attended the banquet at Buckingham Palace, along with more than 170 guests.
However critics, including the Lib Dems and some charities, said the visit should not take place because of Saudi Arabia's human rights record.
King Abdullah's remarks about the 7 July terror attacks have heightened the controversy surrounding the trip.
The Foreign Office was forced to rebut his claims that Saudi authorities had provided information which could have prevented the London bombing atrocities.
"We have appreciated and admired Saudi Arabia's role in the search for a peaceful solution to the Arab-Israeli conflict, in particular Your Majesty's own personal contribution through the Arab Peace Initiative," said the Queen.
"We will continue to support your efforts in the cause of peace in the region," she added.
King Abdullah said "I should like to take this opportunity to call upon our Muslim brethren living in Britain to be honest and upright Muslims and worthy British citizens, striving to build and construct so that they may convey the true image of the principles of Islam - those eternal principles of love, mercy and moderation."
The King also said he was certain the government would try to help end "the tragic ordeal of our Palestinian brethren".
Convoy of limousines
Prime Minister Gordon Brown, Home Secretary Jacqui Smith and Minister for the Middle East Kim Howells joined dignitaries to welcome the king as he arrived at the central London parade ground with the Prince of Wales earlier in the day.
The head of the Metropolitan Police, Sir Ian Blair, who led the force through the London terror attacks of 2005, also greeted the king with a handshake and a smile.
The king reviewed a guard of honour before heading to Buckingham Palace in a carriage.
After lunch with the Queen and the Duke of Edinburgh, the king was shown a specially-created exhibition of Saudi items from the Royal Collection.
He examined a large 15th century Koran, given to Queen Victoria in 1898, and a diamond-encrusted gold sword presented to King George VI by King Ibn Saud in 1943.
The Queen also showed King Abdullah pictures of one of her racing horses, Banknote, which is descended from a horse gifted by the Saudis.
BBC security correspondent Frank Gardner said six planes brought the king and his huge entourage to Heathrow airport.
It took three hours for all the luggage to be unloaded while a convoy of 84 limousines drove the party into London, our correspondent said.
Among them were 23 personal advisors, who are staying at Buckingham Palace, and more than 400 aides who are mostly staying in London hotels, he added.
About 100 human rights and anti-arms trade activists jeered and shouted "shame on you" as the royal procession passed along The Mall in central London.
Human rights activist Peter Tatchell said it was "incredible hypocrisy" for ministers to condemn the Burmese and Zimbabwean regimes while saying nothing about human rights abuses in Saudi Arabia.
He said: "It just shows oil and arms sales seem to have bought the government's silence. "
On Monday, Foreign Office minister Kim Howells called for Britain and Saudi Arabia to work more closely together, despite their differences.
He said the two states could unite around their "shared values".
Acting Liberal Democrat leader Vince Cable said he was boycotting the state visit, while backbench Labour MPs are planning to join human right demonstrators at a protest outside the Saudi embassy on Wednesday.
Downing Street has insisted the government would continue to raise the issue with the Saudi delegation during the week, but said it would not "dominate" talks.
During his visit, the king will also meet Prince Charles to discuss the Prince's Trust and will attend a banquet hosted by the Lord Mayor at the Guildhall, before returning home on Thursday.