The award was conferred on PM Modi after the conclusion of a bilateral meeting with President Abbas.
Commendation of Grand Collar read,"in recognition of his wise leadership, lofty national and international stature, in appreciation of his efforts to promote historic relations between Palestine and India; in acknowledgement of his support to our people's right to freedom so that peace prevails in region”
The Grand Collar is Palestine 's highest order given to foreign dignitaries.
PM Modi flew in a Jordanian army helicopter straight from Amman to Ramallah, where he was received by his Palestinian counterpart Rami Hamdallah.
Prime Minister Modi's chopper was escorted by choppers from Israel Air Force.
"This is a historic visit that will lead to stronger bilateral cooperation," Modi said shortly after landing.
The Prime Minister, accompanied by Hamdallah, visited the Mausoleum of Yasser Arafat in Ramallah and laid a wreath at the grave of the iconic Palestinian leader.
The mausoleum was unveiled on November 10, 2007, and is located adjacent to the Palestinian Presidential compound, also known as Muqata'a here.
After paying homage to Arafat, the Prime Minister took a short tour of the Arafat Museum located adjacent to the mausoleum.
Later, President Abbas received Prime Minister Modi link in an official ceremony at the presidential headquarters in Ramallah before starting official talks.
The two leaders exchanged hugs and stood for the national anthem of the two countries and then inspected the guard of honour. They shook hand with Palestinian and Indian officials.
The two leaders then stepped inside the presidential office for official talks.
After the talks, they will sign bilateral agreements, hold a joint press conference and share lunch before Modi leaves for Amman in a chopper.
Archbishop of Catholic Church, Poulos Marcuzzo, and religious leaders of the Al-Aqsa mosque have also come to the Muqata'a to greet Modi.
Describing India as a "very respected country in the international arena", the 82-year-old Palestinian President had earlier said that India can have a possible role in creating a multilateral forum of negotiations between the Palestinians and Israelis to reach a final agreement.
According to Abbas, Modi's visit to the region reflects India 's long-held position of supporting peace and stability in the region.
During his maiden visit to Israel last year, Modi did not travel to Ramallah link, the Palestinian seat of government. His standalone visit to Israel had led to many analysts questioning the future of the Indo-Palestine ties.
Modi's visit to Palestine comes amid heightened tensions in the region after US President Donald Trump recognised Jerusalem as the capital of Israel.
The unilateral US decision to declare Jerusalem as the capital of Israel was challenged at the UN General Assembly where 128 nations, including India , voted to turn down the move as "null and void".
Trump's decision to declare Jerusalem as Israel's capital angered the Palestinians, sparked protests in the Middle East and raised concern that it could further destabilise the region.
Though India has shied away from becoming a party in the Israel-Palestinian conflict, the Palestinian leader on several occasions has stressed on a possible role for New Delhi in the Middle East peace process.
India believes in a two-state solution in which both Israel and a future Palestinian state coexist peacefully.
The two-state solution envisions independent Israeli and Palestinian states coexisting side by side peacefully.
The Palestinians see east Jerusalem as their future capital.