Syria has deliberately left Quneitra in ruins as a memorial to what it calls Israel's barbaric behaviour.
The pontiff led prayers at an abandoned church in the Syrian-held ghost town of Quneitra, calling upon the peoples of the Middle East to "tear down the walls of hostility and division".
Syrian officials were eager to show the Pope the town, 65km (40 miles) south of Damascus, which was destroyed by the Israelis before being handed back to Syria in 1974.
Syria has deliberately left Quneitra in ruins as a memorial to what it calls Israel's barbaric behaviour.
Thousands of former Quneitra residents were bussed in for the Pope's visit, during which he also planted an olive tree as a symbol of peace.
Correspondents say the visit once again plunged the Pope into an explosive political arena, reviving memories of his visit to Israel last year, when he saw the situation from the other side of the Golan.
Propaganda
The BBC's David Willey says that, while the pontiff is likely to be well aware of the propaganda value to Syria of the Quneitra visit, he believes the town to be a fitting place to underline his calls for Middle East peace.
The pontiff has persisted with his calls for a renunciation of violence amidst a barrage of insults being hurled between Syria and Israel.
As the Pope arrived in Syria, President Bashar al-Assad made a impassioned speech labelling Israelis as "the betrayers of Jesus".
The verbal onslaught continued on Monday, with Syria accusing the Israelis of a long history of crimes against Palestinians and against sites sacred to Muslims and Christians.
"The contemporary Zionists are the same as those Jews who were fought by Jesus Christ who in turn uncovered their hypocrisy and crimes," read a front-page editorial in the government daily Tishreen newspaper.
On Sunday, Israel's President Moshe Katsav called on the pope to reject such sentiments, calling them "racist" and "anti-semitic".
Historic visit
The Pope made history on Sunday by becoming the first Roman Catholic pontiff to set foot in a mosque, where he prayed for peace in the Middle East.
In an address at the Umayyad mosque, he said Muslims and Christians should "offer each other forgiveness" for all the times they "have offended one another".
A plan to offer joint Muslim-Christian prayers was dropped, apparently for fear of wounding Muslim sensitivities.
But our correspondent says that at the end of his visit to Syria, the Pope can claim a considerable personal success in the warm welcome he received not only from the small Catholic community, but also from Christians of all the other various denominations present in the country.
The Pope travels on Tuesday to the Mediterranean island of Malta, where more than 90% of the population is Catholic.