"Our relations have been developing successfully," Putin said at the start of his talks with Abdullah Ahmad Badawi in the Kremlin.
He mentioned plans to send Malaysia's first astronaut into space on board a Russian spacecraft later this year.
The deal was part of a larger arrangement that also envisages Malaysia buying 18 Russian Su-30 MKM fighter jets worth an estimated US$1 billion (EUR746 million), Russian news reports said.
Bilateral trade has reached US$ 1.1 billion (EUR820 million) last year, and Putin on Tuesday called for it to double. "We will do everything to help establish contacts between Malaysia's business circles and Russian business," Putin said.
Badawi voiced hopes for further expansion of bilateral trade and investment.
About 20 million of Russia's 142.8 million population are Muslims, and the Kremlin has touted its observer status in the 57-nation group as an important link with the Muslim world.