The visit and official announcement marked a milestone in Netanyahu's recent policy of seeking out new allies among developing countries that have historically sided with the Palestinians at the United Nations and other international forums.
The visit comes after Chad President Idriss Deby visited Jerusalem in November, for talks during which the leaders discussed cooperation in agriculture, counterterrorism, border protection and technology. Netanyahu hailed what he called a "historic and important breakthrough" with the Muslim-majority country that borders Libya and Sudan.
"Israel is making inroads into the Islamic world. This is the result of considerable effort in recent years. We are making history and we are turning Israel into a rising global power," Netanyahu said from the capital city of N'Djamena, during the first ever visit by an Israeli prime minister. "We are continuing on, up the mountain, to new heights."
Chad broke off relations with Israel in 1972 amid pressure from the Arab world. Most recently, it has played a key role as a partner of the United States and other North African countries in combatting jihadist groups such as Boko Haram in the Sahara.
The desert country is one of the world's least developed states, according to the World Bank's Human Development Index, and its government has been accused of widespread human rights abuses and rigged elections. Deby took power in 1990 and has since been re-elected five times.
Upon departing to Chad on Sunday, Netanyahu promised that there would soon be more visits to countries to restore ties.
"This is very disturbing and even causes outrage in Iran and among the Palestinians who are trying to prevent this. They will not succeed," he said.