She was hosted by Sheikh Zayed on her first visit in 1979, and was invited this time by his son and UAE President Sheikh Khalifa bin Zayed al-Nahayan.
The 84-year-old queen adjusted the scarf worn over her white hat as she made her way into the prayer hall where, at the door, she was escorted to a covered corner to remove her shoes -- a tradition followed by Muslims upon their entrance to mosques.
In addition to her husband Prince Philip, and her son, Prince Andrew, the queen was accompanied by Abu Dhabi Crown Prince Sheikh Mohammad bin Zayed al-Nahayan and UAE Foreign Minister Sheikh Abdullah bin Zayed al-Nahyan.
Inside the mosque, which opened in 2007, the queen listened to children reciting the Koran.
"This visit by the Head of the Church of England to the Sheikh Zayed Grand Mosque is reflective of the multi-faith dialogue and tolerance that is common to both the UAE and UK," the British embassy said.
With colourful inlaid floral designs ornamenting its walls, floors and ceilings, the Grand Sheikh Zayed Mosque blends different architectural cultures in its rich design.
"There is a very deep friendship between Her Majesty and the ruling families here," British ambassador Dominic Jermey told AFP.
"The relation we have now" is based on "a common perception of our political interests, a shared analysis of threats and very close business and investment links between our two countries," said Jermey.
"This visit is about looking into the future."
The United Arab Emirates, which Britain considers one of its most important trading partners in the Gulf region, is home to 120,000 British expatriates.
British "companies have been here for a long time. Oil and gas is clearly an area of excellence: BP and Shell both have long roots here," Frances Moffett Kouadio, the director of trade and investment at the embassy, told AFP.
The queen will also unveil the design of the new Sheikh Zayed Museum which will be built on Saadiyat Island, off the Abu Dhabi coast in partnership with the British Museum.
The museum is being designed by British architects Foster and Partners.
The queen was also accompanied by British Foreign Secretary William Hague.
On Thursday evening, Queen Elizabeth II will fly to neighbouring Oman to mark the 40th anniversary of the rule of Sultan Qaboos.
The seven emirates that make up the UAE were British protectorates until independence in 1971, while Oman has a history of close economic and military relations with Britain, home to 1.6 million Muslims.
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