"We have signed an intergovernmental agreement on the purchase of 36 Rafale aircraft. Only some of the financial aspects need to be solved," Modi was quoted as saying in a statement.
Paris also confirmed the signing of the document on its official Twitter account.
"We are delighted that an intergovernmental agreement on the Rafale has been concluded," the tweet reads.
French President Francois Hollande said during the joint press conference with Modi that France was willing to provide the aircraft to India, which have performed well in the fight against terrorism.
The two countries are aware of threats of terrorism around the world and will never be impressed by extremist groups' provocations, according to the French leader.
Hollande arrived for a three-day visit to India on Sunday in order to close the deal for the sale of the Rafale fighter aircraft, which took over three years to negotiate.
The Rafale is a French fourth-generation multirole twin-engine fighter aircraft, designed and built by Dassault Aviation.
Initially, India planned to buy 126 Rafale jets to modernize its air force. However, in July, New Delhi canceled its order for 90 of the jets.