The four-day visit by the far-right leader comes a week before Israel's closely contested election in which Prime Minister Benjamin Netanyahu is battling Benny Gantz, a popular centrist candidate and corruption allegations, which he denies.
"I love Israel," Bolsonaro said in Hebrew at a welcoming ceremony, with Netanyahu at his side, at Tel Aviv's Ben-Gurion Airport.
Netanyahu said he and Bolsonaro would sign "many agreements", including security deals, and that the Brazilian leader would visit Judaism's holy Western Wall, "in Jerusalem, our eternal capital".
"You're arrival will elevate the relationship between our countries to new heights," Netanyahu said.
Ynet's sister publication - financial news website Calcalist - reported on Sunday that Brazilian state-run oil firm Petrobras was considering bidding in a new tender to explore for oil and gas offshore Israel and a final decision would be announced during Bolsonaro's visit.
Earlier this month, a Brazilian government official said no decision had been made on the embassy move, but "something will have to be said about the embassy during the trip".
The official, who spoke on condition of anonymity, added that a formal announcement might not come during the visit.
Visiting Brazil for the January 1 presidential inauguration, Netanyahu said Bolsonaro had told him that moving the Brazilian embassy in Israel to Jerusalem from Tel Aviv was a matter of "when, not if".
Like Netanyahu, Bolsonaro is an outspoken admirer of US President Donald Trump, who moved the US embassy to Jerusalem last May, five months after breaking with international consensus and recognising the city as Israel's capital.
Bolsonaro also enjoys strong evangelical support at home. Netanyahu has courted US evangelical leaders during his current decade in power.
But in an interview in February, Brazilian Vice President Hamilton Mourao, a retired army general, said that moving the embassy was a bad idea because it would hurt Brazil's exports to Arab countries, including an estimated $5 billion in sales of halal food that comply with Muslim dietary laws.
Bolsonaro's economic team and the country's powerful farm lobby have advised against relocating the embassy to Jerusalem.