It is the first official visit by a Russian president to the country in the history of bilateral relations, and it is expected to focus on trade and cooperation in the energy sphere.
"Energy and finance are the key areas of cooperation between Russia and Luxembourg," Kremlin aide Sergei Prikhodko said ahead of Putin's visit, adding that the sides were planning to sign four agreements with a number of Russian companies.
Prikhodko said bilateral trade more than tripled in the past three years, from $66.6 million in 2003 to $228.3 million in 2006.
On Wednesday, Putin visited Austria in an attempt to win support for Moscow in its current political spat with new EU members - Poland, Estonia and Lithuania - but apparently failed to veer the Austrian leadership out of the European solidarity.
