The closed-door session marked the start of complex negotiations expected to last at least until the end of this year under the chairmanship of United Nations special envoy Martti Ahtisaari, a former Finnish president and veteran UN troubleshooter.
The negotiations will ultimately determine whether Kosovo becomes independent of Serbia, as demanded by its ethnic Albanian majority of almost two million, or remains part of the former Yugoslav republic of Serbia, the option backed by Belgrade and the province's tiny Serb minority.
"It was very constructive and successful," said Mr Ahtisaari's deputy Albert Rohan who chaired the meeting, held in an almost total media black-out.
The discussions in Vienna, which were scheduled to continue until late on Tuesday, were focused essentially on decentralization - the reform of Kosovo's local government to ensure greater autonomy for minority communities who fear marginalisation under a central, ethnic Albanian-dominated government.
Health care and education
Talks were centred on the transfer of competencies in the fields of health care, education, welfare and culture, while on Tuesday the delegations were discussing more important topics including justice, police and administration.
However, wide differences between the two teams marked the talks, sources said.
"We haven't managed to get closer to any compromise formula or conclusion, but we did not expect that" immediately, said a diplomatic source close to the negotiations.
Each side had presented its views on decentralisation during the initial session and had "exchanged questions over various topics" during the coffee break, said the diplomat, who asked not to be named.
It remains to be seen how much progress can be made at the long-awaited talks, which were postponed after the death on January 21 of Kosovo president Ibrahim Rugova.
Seven years after the end of the war between Serbian forces and ethnic Albanian guerrillas, the central government in Belgrade and provincial government in Pristina are still firmly entrenched in rival positions.
Serbs and other non-Albanians make up just four percent of Kosovo's population. Only around 80,000 of them have remained in Kosovo since the 1998-99 war and they live in tiny isolated enclaves, heavily protected by NATO-led peacekeepers.
Serbia and its people also broadly reject independence for Kosovo because they see the southern territory as the cradle both of their nation and of their Orthodox religion.