Ambassador Nancy Powell met Modi in Gujarat's capital Gandhinagar. It was the highest-profile encounter between U.S. officials and Modi since the State Department revoked his visa in 2005 over the bloodshed there three years previously.
Television footage showed her shaking Modi's hand and smiling, while he gave her a bunch of red and yellow flowers. They then sat in a meeting room at his residence accompanied by officials.
In a statement released afterwards, the embassy said the meeting was part of its "outreach" to senior leaders of India's major political parties before elections, which are due by May.
Powell's talks with Modi and others in Gujarat focused on the importance of the U.S.-India relationship, regional security, human rights, and U.S. trade and investment in India.
"The United States and India are moving forward with a strategic partnership that is broad and deep," it said.
The meeting took place, however, at a delicate time.
The two countries are developing closer commercial and strategic ties and share almost $100 billion worth of annual trade. But an often volatile relationship has come under strain because of a simmering trade dispute and a row over the arrest of an Indian diplomat in New York after she was accused of visa fraud and underpaying her maid.
It was not immediately known if the question of Modi's visa status came up at the meeting with Powell. Officials and analysts said that if he was to become prime minister, the United States was unlikely to uphold its ban.
Modi's Bharatiya Janata Party is considered the favourite to form a government after the general election.
"The guy would (be) prime minister and that's different from being chief minister. You can't shut out the prime minister of one of our largest allies and someone who frankly is very pro-American," a congressional source in Washington told Reuters.
Modi has always denied accusations that he allowed or even encouraged attacks on Muslims in the 2002 riots and a Supreme Court inquiry found no evidence to prosecute him.
The violence erupted after 59 people, mostly Hindu pilgrims, were killed in a fire on a train. Hindu crowds subsequently killed at least 1,000 people, most of them Muslims, across Gujarat.
VISA ON MERIT
The U.S. State Department said any application for a visa would be treated on its merits.
But the U.S. Commission on International Religious Freedom, a government agency which recommended that visas be denied to Modi in 2005, said it had not changed its position.
"Neither the passage of time nor any change in Mr. Modi's position in government absolves him and his government of their alleged involvement, negligence, and complicity in the 2002 violence," its chairman, Robert George, told Reuters.
Govinda Acharya of rights group Amnesty International said that other foreign leaders accused of human rights violations often came to the United States.
"I would speculate that Modi, if he became prime minister, would be able to visit the United States with diplomatic immunity, but not for a private visit. He would certainly be able to come, I would imagine, to the United Nations."
Britain became the first European country to end an informal boycott on meeting Modi, which had been in place since the riots. Other European countries followed suit last year.
The U.S. consul general met Modi two years ago and Republican lawmakers recently visited Gujarat and invited him to the United States.
The U.S. Embassy had been seeking a meeting for the past two months, a Gujarat state official said. It had not been possible until this week because of his hectic campaigning schedule plus the dispute over the diplomat, which flared up in December and caused a public outcry in India against Washington.
U.S. automaker Ford is due to open a plant this year in Gujarat, where Modi has been praised by business leaders for cutting red tape. General Motors already has a production facility there.
Modi's party is opposed, however, to companies like Wal-Mart opening supermarkets in India.
Zahir Janmohamed, a rights activist and writer who took part in the original campaign against Modi's visa in 2005, said he saw the rapprochement as pragmatic politics.
"I don't see this as a policy shift, because if you look at last year's State Department rights report, the U.S. still has some strong concerns about Modi. I think it's just a very practical thing the U.S. has to do."