Goody - who was accused of bullying Shetty during the reality show - met the Bollywood star as she prepared to enter the Indian version of Big Brother, which in an ironic twist is being hosted by Shetty.
Earlier the 33-year-old told of her shock at Goody's decision to participate in the Big Boss.
Reunited: Jade Goody and Shilpa Shetty share a hug as they meet for the first time since the racist controversy on Celebrity Big Brother 2007
She said she hoped the 27-year-old's bid to try and make amends would help her lose her 'misconceptions about India.
'When I found out Jade was going to be on Big Brother India I was as shocked as I was when I first met her,' she said.'
'Why would she go through this again? But then part of me was really happy because this is our opportunity to show her true Indian hospitality and how warm and welcoming we are.
Big hopes: Jade is appearing as a guest in the Indian version of Big Brother - which Shilpa is hosting - in a bid to repair her reputation
She's going in as someone who has had misconceptions about our country.
'I hope Jade learns first hand through this experience about our culture and how beautiful it is and how wonderful our people are.
'I hope this is an educating and enlightening experience that enriches her idea of what India is.'
The treatment of Shilpa, by Jade, and fellow housemates Jo O' Meara and Danielle Lloyd sparked more than 40,000 complaints to media regulator Ofcom.
Culture Secretary Tessa Jowell waded into the row, which even overshadowed Chancellor Gordon Brown's visit to India.
Goody entered the Bigg Boss house this weekend after being promised a reported £100,000
People in India were burning effigies of Jade in the street after she was caught on camera badmouthing 'Shilpa Poppadom'.
Her perfume was taken off the shelves and publishers scrapped plans for a paperback version of her autobiography.
Channel 4, which came under fire for not intervening in the furore, launched a review into the series.
Mother-of-two Jade, who went into the house this weekend after being promised a reported £100,000, is said to be nervous about appearing but determined to clear her name of allegations of racism.
Shetty went on to win the 2007 show and said she hoped Goody could follow in her footsteps by presenting a positive image of her country.
'I went into the UK Big Brother house to represent India and when I came out everyone's perceptions of Indians had changed slightly for the better,' she added.
Flashback: Jade was accused of bullying on the celebrity version of the show
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