Iranian President Hassan Rohani has arrived in Baku on his first visit to Azerbaijan since his election last year.
Rohani will meet with President Ilham Aliyev and deliver a speech to parliament.
Rohani is also scheduled to hold talks with senior Azerbaijani officials and preside over the signing of trade deals.
Relations between the Caspian Sea neighbors have improved following a period of tension that peaked in 2012, when Azerbaijani authorities arrested a number of men they alleged had links to Iran and were suspected of plotting attacks in Azerbaijan.
Iran and Azerbaijan have the ability to boost trade turnover to $10 billion, according to Mahmud Vaezi, the Iranian cochair of the Azerbaijani-Iran intergovernmental commission on economic, trade, and humanitarian cooperation.
Vaezi traveled to Baku last week for talks to prepare for Rohani's two-day visit.