"We are going to cast aside all doubts and suspicions and welcome a new era of relations," said President Bush, in a televised face-to-face meeting with Putin shortly before the signing ceremony at the Kremlin.
"Today we may say we are creating qualitatively new relations," President Putin told President Bush, speaking across a long conference table.
The Treaty of Moscow, the centerpiece of the four-day summit that began on Thursday evening, will commit the former Cold War adversaries to cutting their arsenals to between 1,700 and 2,200 warheads by the year 2012. The two nuclear giants currently hold about 6,000 warheads each.
Putin said there were legitimate reasons for keeping a smaller nuclear arms supply. "Out there, there are other states who possess nuclear arms," he said. "There are countries that want to acquire weapons of mass destruction."
The Bush administration wants the treaty to be seen as the most dramatic nuclear arms reduction in history. But some critics say the treaty merely rearranges the arsenals of the two nations, because the agreement does not require either nation to destroy any warheads. It instead allows the U.S. and Russia to comply with the treaty by putting warheads in storage, where it is possible they could be used at some point in the future.
The pact, the first nuclear disarmament agreement between the former superpower rivals since January 1993, is expected to set the seal on Russia's shift to a more pro-Western foreign policy. But the fact that the agreement was even put on paper was a concession to Putin, who wanted formal language to be ratified by both the U.S. Senate and the Russian Duma. Bush originally called for a handshake agreement. Ratification is expected in both countries.
The two also signed a declaration which set the seal on a new strategic relationship.
However, analysts say the pact smacks of outdated superpower rivalry and is barely relevant to the fight against terrorism which Presidents Bush and Putin both see as the new global threat after the September 11 airliner attacks in New York and Washington.
And even before the curtain rose on the carefully scripted event, President Bush's first summit on Russian soil was overshadowed by U.S. accusations that Russia has been supplying sensitive technology to Iran - denounced by Washington as a sponsor of terrorism.
"Welcome to Moscow, my dear friend," a beaming Putin said in English as the two presidents strode into the Kremlin's ornate Green Room.
"Beautiful place," replied President Bush, gazing around at plush furnishings, gilt clocks and enormous paintings.
Putin, who is studying English to complement his fluent German, then asked Mr. Bush whether he was having a good trip through Europe.
"Yes, good. Thanks," President Bush replied as both men, flanked by their national security advisers, smiled.
Mr. Bush flew into Moscow from Germany where, signaling the war on terror would be the core theme of his Europe tour, he told his European allies to put differences aside and transform the NATO alliance into a potent force to fight terrorism.
Putin, who will show President Bush around his home town of St Petersburg on Saturday after a day of summitry in Moscow, is seeking vital Western support for Russia's stumbling economy.
But officials in Washington said it is unlikely Putin will secure any of the economic concessions he is seeking, including the designation of Russia as a "market economy" and the abandonment of 1970s restrictions on trade.
Putin also needs to show his pro-Western policies, which he has pursued at risk from military and conservative hawks at home, are not a case of one-way concessions.
Security was tight in the Russian capital ahead of the Kremlin meeting. Traffic police were out in greater force than usual and news reports said snipers were posted on rooftops.
Before entering the Kremlin in a motorcade, President Bush placed a wreath of white carnations and irises at the Tomb of the Unknown soldier by the towering Kremlin wall, honoring Russian and Soviet war dead, including over 20 million in World War Two.
The dispute over Moscow's nuclear cooperation with Iran threatened to puncture the bonhomie, however. President Bush has described Iran, Iraq and North Korea as forming an "axis of evil."
In Berlin Thursday, President Bush suggested Moscow's help to Iran in building a nuclear power plant at Bushehr was contributing to weapons proliferation.
"Russia needs to be concerned about proliferation into a country that might view them as an enemy at some time and if Iran gets a weapon of mass destruction deliverable by a missile, that's going to be a problem...for all of us, including Russia," he said.
A senior Bush administration official called Russian assistance for Iran's nuclear program "the single-most important proliferation threat there is."
"Frankly, we haven't been able to see eye to eye about it," the official said.
Russian Foreign Minister Igor Ivanov rejected the U.S. fears as groundless. "Russia is firmly loyal to the non-proliferation of weapons of mass destruction," Ivanov told NTV television.
He said construction of the $800 million Bushehr plant was being carried out strictly under the supervision of the United Nations body, the International Atomic Energy Agency.
There have been suggestions the United States might try to persuade major industrial nations to reduce old Soviet debt in return for Russia giving up the Iran project.
Russia is also ill at ease over increasingly shrill U.S. attacks on Iraq, with which Moscow has close economic ties.
Ivanov said Moscow was opposed to any proposed military strike on Iraqi leader Saddam Hussein "and Russia is doing everything to prevent such an operation beginning."