Muslims protested at the presence of Rushdie in India
It was his first visit since the late Iranian leader Ayatollah Khomeini issued a death edict, or fatwa, against him in February 1989.
But hundreds of Muslims protested
against his presence and took to the streets, chanting slogans against the author.
His latest book, The Ground Beneath Her Feet, is among four shortlisted for the Commonwealth Writers' Prize, due to be awarded at a ceremony in the Indian capital, Delhi.
'Moving'
Mr Rushdie is being accompanied by his son Zafar. He said he was delighted to be back and wanted to show his son a country he had not seen.
"I have come here to renew a broken connection," Mr Rushdie told a news conference.
"For me it has been a very moving occasion to be back here ... I just hope this long rift between me and India is now over," he said.
Mr Rushdie is attending the gala award ceremony for this year's winner of the Commonwealth Writer's Prize and is one of the favourites to take the award.
The BBC's Daniel Lak says security is extremely tight but Mr Rushdie was seen mixing freely with the guests, many of whom welcomed him warmly.
Angry protests
Earlier, Muslim demonstrators gathered after Friday prayers in Old Delhi and marched to an area traditionally used for protests near the Indian parliament.
They burned an effigy of Mr Rushdie and shouted that he was a heretic.
"The heretic who has insulted Islam and our prophet Mohammad ... should never have got a visa to India," said a Muslim politician, Shoaib Iqbal.
A strong contingent of armed policemen stopped the protesters as they tried to break free of a police cordon.
Indian roots
Mr Rushdie has wanted to return to India, the inspiration for most of his work, for more than a decade.
But it was only last year that the Indian Government agreed to grant him a visa, fearing unrest among the country's substantial Muslim population.
He recently won a legal case, giving him control of family property near the Himalayas in northern India, and he expressed a desire to visit his ancestral home.
He reportedly arrived in India one week ago, although government officials refused to confirm his itinerary.
It is not known exactly where he has been on this trip, or what he has been doing.
Press reports have placed him in the tourist city of Jaipur, west of Delhi, and in Simla, the summer capital of British India.