At the end of his 25-minute address to lawmakers at the State Great Hural - the Parliament - Modi turned around and pointed to state emblem which had a lotus among other symbols.
"When I entered the Parliament, I saw this symbol and I found special connection with this Parliament," he said.
Pointing his finger towards the emblem, he told lawmakers that there is a louts on the emblem and his party BJP's symbol is also louts.
His remarks was followed by clappings from lawmakers.
Mongolia bestowed a rare honour on Modi by convening its Parliament on Sunday - a holiday - for his address.
Modi, who arrived here last night from China on the second leg of his three-nation tour, is the first Indian Prime Minister to visit the country.