The visit scheduled on June 15 to 16 will provide an opportunity to discuss bilateral issues and further strengthen Indo-Bhutan relations.
"We're honoured to have him choose Bhutan as the first country he's visiting after assuming office. This is a historic visit, the entire world is watching, not just the SAARC region, and we're extremely happy, we're proud," said Bhutanese Prime Minister Tshering Tobgay.
"It speaks volumes about the importance he attaches to the region, but more significantly to the importance he attaches to the friendship between our two great countries," Tobgay was quoted as saying by the the local newspaper, Kuensel.
The 11th Five Year Plan, the ongoing hydropower projects and the Economic Stimulus Plan will also be discussed in the meeting.
"But as of now, we don't see any specific issue that we'll be discussing, as far as we're concerned, our main agenda is to further cement our already very strong ties of friendship," Tobgay said.
Preparations are underway in the capital city to what local newspapers have described as "modi-fication".
Gates and bridges are also being hoisted and painted. Modi is expected to meet King Jigme Khesar Namgyel Wangchuck, head of state Druk Gyalpo and other senior government officials during his stay.
The visit reflects the importance India attaches to its ties with Bhutan. Prime Minister Tobgay was among the leaders from the neighbouring countries to attend Modi's swearing-in in New Delhi on May 26.