The Bulgarian Orthodox church in Balat, a historic Istanbul neighbourhood on the shores of the Golden Horn traditionally home to Christians and Jews, was built in 1898 after its original wooden structure was destroyed in a fire.
Made out of cast iron, the iconic ornate building has been dubbed the "Iron Church".
For President Recep Tayyip Erdogan, who hosts Bulgaria's conservative Prime Minister Boyko Borisov, the ceremony will be a riposte to charges that Turkey's Islamic-rooted government does not do enough to protect the rights of Christian minorities and their heritage.
It is also seen as a sign of appeasement after a spat erupted in spring in the run-up to Bulgarian elections, and a Turkish referendum on expanding Erdogan's power.
Bulgaria, which holds the rotating EU presidency for the next six months, shares a 270-kilometre (165-mile) border with Turkey.
Turkey is home to more than 200,000 ethnic Turks with Bulgarian passports who left Bulgaria during the communist era.
Around a third of them regularly turn out for Bulgarian elections, with the last ballot taking place on March 26.
Bulgaria, meanwhile, is home to a 700,000-strong ethnic Turkish minority, a legacy of the Ottoman empire.
Sofia had accused Ankara of meddling in its March polls, summoning Turkey's ambassador and recalling its own envoy from Turkey for consultations.
Meanwhile the main party representing the Turkish minority in Bulgaria had denounced Turkey's April vote on granting Erdogan sweeping powers as "madness".
But in a show of cooperation, Bulgaria and Turkey co-funded St Stephen's restoration, one of the world's oldest prefabricated cast iron churches.
The iron elements were produced in Austria in the 19th century and shipped to Istanbul through the Danube and the Black Sea.
Vasil Liaze, president of a foundation overseeing the church, told Turkish media that the church had been restored under so-called rules of reciprocity.
This means that Sofia has given the green light for the Cuma (Friday) Mosque in Bulgaria's second city of Plovdiv to be restored in return.
In a key trip to neighbouring Greece in December, Erdogan said the rights of Turkish-speaking Muslim minorities should be safeguarded.
Istanbul also insists it has passed reforms to improve minorities' rights including legislation allowing minority groups to buy and renovate their properties.
In June 2014, when he was prime minister, Erdogan said that the government had returned to minority foundations their confiscated assets worth over $2 billion.
But opponents say Erdogan's ruling Justice and Development Party have done little to expand rights for minorities, and showed intolerance for dissenting voices.
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