The Turkish leader was visiting Southeast Asia's largest economy after travelling to Malaysia and before heading to Pakistan on a four-day tour of key allies in the Islamic world.
He was greeted at a presidential palace in Bogor, a city south of the capital Jakarta, by a traditional marching band, national anthems and schoolchildren waving flags.
"We are committed to increasing trade between the two countries, which is mutually beneficial," Prabowo said after the talks.
"We also agree to increase joint production and cooperation in the defence industry."
Prabowo said that would include joint training for soldiers and closer collaboration on counter-terrorism and intelligence.
"We have looked at further opportunities for collaboration in the defence sector," Erdogan said.
Turkish manufacturer Baykar and Indonesian company Republikorp agreed on the delivery of 60 Turkish Bayraktar TB3 drones and nine Akinci medium-to-high altitude combat drones capable of carrying missiles, reported the Turkish national news agency Anadolu.
Akinci drones can carry a 1,500-kilogram payload, according to Baykar's website.
Over time, some parts will be built in Indonesia.
A dozen agreements on trade, energy, higher education and religious affairs were signed by ministers and officials, including a deal to manufacture drones in Indonesia, as the pair watched on.
Prabowo earlier called Erdogan "my close friend, my brother" and said both sides were also trying to accelerate the signing of a free trade agreement.
The leaders held their nations' first High-Level Strategic Cooperation Council meeting before the agreements were signed.
Erdogan said the pair discussed global issues including Syria and the Palestinian cause, alongside future deals seeking to boost their trade to $10 billion a year.
Trade between Indonesia and Turkey in 2024 was worth $2.4 billion, according to Indonesia's trade ministry.
The leaders last met in July for talks in the Turkish capital Ankara before then-defence minister Prabowo was officially inaugurated as Indonesia's president.
Relations between the two countries grew closer under Prabowo's predecessor Joko Widodo, who paid a state visit to Turkey in 2017.
In 2023, Indonesia purchased 12 Turkish drones worth around $300 million in a push to upgrade its ageing military.
Both are members of the 57-member Organisation of Islamic Cooperation where they are staunch supporters of Palestinians and vocal critics of Israel.
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