He will meet Bhutan's King Jigme Khesar Namgyel Wangchuck and Prime Minister Tshering Tobgay during his two-day visit which will see the two sides exploring ways to boost their ties, particularly in trade and hydro-electricity.
Modi will also address the joint session of the national assembly and national council of Bhutan and meet the leader of the opposition.
The fact that the Prime Minister chose Bhutan as his first foreign destination assumes significance since China has lately intensified efforts to win it over and establish full- fledged diplomatic ties with Thimphu.
"Our relations with Bhutan are unique and especially warm. Our historical and cultural linkages make us natural friends and partners," the foreign secretary told a press conference here while talking about the visit.
"Bhutan is one of our most important strategic partners... It is a very good country to show our policy of good neighbourliness in South Asia and special token of our friendship," she said explaining why Bhutan was chosen as the first foreign destination of Modi.
"We will explore ways and means of strengthening our ties in important areas," she said.