Vladimir Putin has admitted that Russia shot down the Azerbaijani Airlines jetliner which crashed on Christmas day killing 38 people.
The flight from Azerbaijan's capital Baku to the Russian city of Grozny crashed with 67 passengers and five crew members on board near Aktau, western Kazakhstan last year.
Russia on Thursday admitted for the first time that their air defenses were to blame for downing the jet which attempted to make an emergency landing before erupting in a fireball.
Putin's first admission of responsibility for the crash comes in an effort to ease tensions between the neighbours.
He said the missiles fired by Russian air defenses to target a Ukrainian drone exploded near the Azerbaijan Airlines plane as it was preparing to land in Grozny, the regional capital of the Russian republic of Chechnya.
Ukrainian drones have regularly struck deep inside Russia.
Speaking at a meeting with Azerbaijan's President Ilham Aliyev in Tajikistan's capital of Dushanbe, where both were attending a summit of the former Soviet nations, Putin pledged to punish those responsible and provide compensation.
Azerbaijani authorities had said the Embraer 190 jet was hit accidentally by Russian fire, then tried to land in western Kazakhstan, where it crashed and killing more than half on board.
Days after the crash, Putin apologized to Aliyev for what he called a 'tragic incident' but stopped short of acknowledging responsibility.
Aliyev, meanwhile, criticized Moscow for trying to 'hush up' the incident.
The controversy over the crash has roiled the previously warm ties between Moscow and Baku.
Their relations were further destabilized by deaths of ethnic Azerbaijanis rounded up by police in a Russian city in June and a series of arrests of Russians in Azerbaijan.
Speaking to Aliyev on Thursday, Putin said that Russian air defenses that targeted a Ukrainian drone fired on the Azerbaijani airliner because of a 'technical malfunction,' adding that two missiles exploded just 10 meters away from the passenger jet.
'The Russian side will obviously do everything to provide compensation and give legal assessment to all responsible officials' action,' he said.
'Of course, these words related to this tragedy, aimed at supporting - morally supporting - the families do not solve the main problem: We can't bring back to life those who died as a result of the tragedy,' Putin added.
He voiced hope for overcoming the strain between the countries and fully rebuilding the ties.
'I would like to thank you for keeping the situation under your personal control,' he said.
The Azerbaijani leader said they had a chance to discuss a 'broad and positive' bilateral agenda, voicing hope that 'the messages we are sending today to our societies will meet a positive response.'
'I hope that our cooperation not only will be restored, but continue in the spirit of our relations, the spirit of our alliance,' he said.
Aliyev thanked Putin for investigating the cause of the plane's downing.