Sri Lanka's new government and Tamil Tiger rebels are holding the peace talks near Geneva in Switzerland, focusing on salvaging a 2002-enforced ceasefire arranged by Norway.
"We urge parties to approach the opportunity with an open and flexible attitude," said the United States, Japan, the European Union and Norway who have tied $A6.1 billion of aid to Sri Lanka to progress on a peace settlement.
The so called Co-Chairs of the Tokyo Donors' Conference welcomed the negotiations "as an opportunity to restore confidence in the ceasefire agreement and move forward toward a peaceful future," a US State Department statement said.
"We also welcome the decreased violence since the January 25 announcement of the talks as a sign that the parties take seriously and fully respect their commitments under the Ceasefire Agreement," the statement said.
The donor nations commended Norway for its role as facilitator of the peace process and said they were ready to assist the Scandinavian nation in efforts to bring about durable peace.
More than 60,000 people have been killed in Sri Lanka's three-decades-old ethnic conflict, and four previous peace attempts have ended in failure.
Colombo and the Tigers had wrangled over a venue for months and finally agreed in January to meet in neutral Switzerland.
Talks a breakthrough
Diplomats said they believed that the most they could achieve in the current talks would be an agreement to hold further meetings, even if getting both sides to the table was "a big breakthrough" in itself.
Violence in Sri Lanka and queries on the legality of the truce marred the first round which got underway on Wednesday.
"Let us keep expectations at a realistic level," Norwegian peace broker Erik Solheim told reporters at the talks' venue, the Chateau de Bossey near Geneva.
"There is very low confidence between the parties. Confidence can increase, but it starts at a low level," he said.
Colombo's chief negotiator Nimal Siripala de Silva fired the first salvo by declaring that the February 2002 truce arranged by Norway was "contrary to our constitution and law."
"Nevertheless, we acknowledge that certain benefits flowed to the people from the observance of the ceasefire," he said, adding that the government was still prepared to talk about a "meaningful ceasefire."
The government slammed the Tigers for violating human rights, recruiting child soldiers and breaking the ceasefire on more than 5,400 occasions.
The rebels hit back, rejecting the government charges as "exaggerated" and making it clear they will not entertain any move to tinker with the ceasefire agreement.
Tiger chief negotiator Anton Balasingham, in his response to Colombo's opening remarks, rejected government allegations and defended the truce document.
With the closed-door talks scheduled to end on Thursday, official sources said that the negotiations had been heated.