Sergeant First Class Zachary Baumel had been listed as missing along with two other Israeli soldiers after a deadly battle with Syrian forces in a Lebanese village, and the return of his remains will bring to a close a highly sensitive case for Israelis.
Russia said it handed over the remains to Benjamin Netanyahu, the Israeli prime minister, who is visiting Putin five days before he is to seek a fifth term in office in a difficult election.
Mr Netanyahu, 69, is running in the April 9 vote despite facing potential corruption charges and experts say he hopes the Moscow visit will increase his chances of success on election day.
"Our military together with Syrian partners found the place of his burial," Mr Putin said of Baumel. "We are very happy that he will be able to receive the right military honours in his homeland."
Mr Netanyahu said Mr Baumel would be laid to rest at a ceremony in Israel later Thursday. "Zachary’s friends and family will take part," he said, adding that his family had been "very touched".
"His father is no longer alive, unfortunately," he added. "His mother is around 100 years old. Zachary also has a sister."
Neither Russia nor Israel have given details on how or where the remains were found. Mr Putin said only that Syria – with which Israel has technically been at war – participated in the operation.