Kostunica paid a return visit to Zagreb after Sanader toured Belgrade a year ago, which was the first official visit of a Croatian prime minister in the last 15 years.
Sanader said at a news conference that the arrival of Prime Minister Kostunica in Zagreb was a step forward in efforts to solve outstanding issues between the two neighbours.
Croatia and Serbia must play a key role in maintaining the political stability in this part of Europe, Sanader added
The two officials said that Croatian-Serbian cooperation was important not only for the two countries but also for the stability and prosperity of the entire region and its integration with the European Union.
Sanader also congratulated Kostunica on the recent opening of the negotiations with the European Commission on a Stabilisation and Association Agreement, adding that "Croatia is happy to see every step forward Serbia makes on the path to Europe."
The Croatian official went on to say that Zagreb and Belgrade wanted to solve humanitarian problems and issues which were opened after the war, primarily the fate of missing persons, which he said was an absolute priority in bilateral relations.
He recalled that the two countries had last year concluded an agreement on the protection of ethnic minorities and voiced hope that remaining issues in this segment would be solved.
The process of the return of refugees must be completed by the end of 2006, Sanader said, adding that restitution of property was completed in Croatia, "except for several dozen cases which are being dealt with by courts".
Commenting on the topic of borders, Sanader said his country stood by the position that the decision of the Badinter Commission which recognised the borders of the former republics, constituent parts of the Socialist Federal Yugoslavia, should be honoured.
"Croatia and Serbia undoubtedly have a joint future in Europe ... and Serbia is glad to see Croatia's every step towards the European Union and perceives it as progress of the entire region," Kostunica said.
He said, among other things, that the painful issue of the missing persons must be solved, adding that the issue of refugees should be solved in a wider context than the relations between Croatia and Serbia.
Asked by a reporter whether Kostunica would use his first official visit to Croatia as an opportunity to offer apology for what had happened in the war, Kostunica avoided a direct answer.
"Problems between the two countries are being solved in a way that concrete problems are solved and this is something which we have concluded. What is important is to solve, if possible, ever problem that is the legacy of the war, every case of human suffering and calamity. This cannot be solved by words but through solving problems which exist on both sides," he said answering the reporter's question.
The two premiers attended ceremonies at which relevant ministers of the two countries signed agreements on cooperation in veterinary medicine and plant protection.
Croatia and the state union of Serbia-Montenegro signed an agreement on international combined transport, and a protocol on the reconstruction of a railway bridge over the Danube river between the eastern Croatian town of Erdut and Serbia's Bogojevo, which will be financed by donations from the Norwegian and Belgian governments.
Also signed was a memorandum on scientific cooperation.
Kostunica and the Serbian delegation visited the Croatian parliament where they were received by Sabor Speaker Vladimir Seks. Later in the day they will meet Croatian President Stjepan Mesic.
Sanader and Kostunica were also expected to attend a meeting of Croatian and Serbian business people, which was taking place at the Croatian Chamber of the Economy.