"Advancing bilateral engagements. PM @narendramodi & PM @antoniocostapm discuss ways to further intensify bilateral relations," External Affairs Ministry spokesperson Gopal Baglay tweeted along with some photographs.
The two sides are expected to sign some agreements.
Departing from protocol, Portuguese Foreign Minister Augusto Santos Silva received Prime Minister Modi at the airport earlier in the day.
Before leaving for Lisbon, Modi had said during his meeting with Costa, the two leaders will build on their recent discussions and review the progress of various joint initiatives and decisions.
Portuguese Prime Minister Costa said in a tweet that this was an excellent opportunity to review the implementation of the accords agreed during his India visit and sign new agreements. Costa had visited India in January this year.
The highlight of Modi's four-day three-nation visit will be the US leg as Modi will be meeting President Donald Trump for the first time on June 26 in Washington.
From the US, he will travel to the Netherlands.