North Korea is to send a delegation of high-ranking officials to the Winter Olympics next month, the news agency Yonhap reports.
During Tuesday's talks held in the heavily fortified "truce village" of Panmunjom, Seoul also proposed that reunions of separated families could be held around next month's Lunar New Year's holiday.
The head of South Korea's delegation, Unification Minister Cho Myoung Gyon, said he hoped next month's Games could be an "event of peace and a stepping stone for better inter-Korea relations."
Cho says South Korea proposed the two Koreas conduct a joint march during the Games' opening and closing ceremonies.
His North Korean counterpart, Ri Son Gwon, said later as the meeting began that Pyongyang was hoping "to give precious results to the Korean people who harbour high expectations for this meeting," according to South Korea's Yonhap news agency.
The meeting began as scheduled with five delegates from each side arriving in Panmunjom, located just inside North Korea at the de facto border.
It is hoped the talks will lead to a thaw in the rivals' relations after ties deteriorated significantly last year due to Pyongyang's rapidly accelerating ballistic missile and nuclear weapons testing programs.
Cho said apart from the Olympics, South Korea was planning to discuss ways of easing military tensions and reuniting families torn apart by the Korean War.
There have been no official inter-Korean talks since late 2015.
China welcomed the high-level talks.
"We are very pleased that the high-level talks between the two Koreas could be held," said foreign ministry spokesman Lu Kang.
"As a neighbour of the Korean peninsula, China welcomes and supports the recent positive actions taken by the two Koreas to ease their mutual relations."
Analysts say North Korean leader Kim Jong Un's attempt to restore dialogue with Seoul could be a gambit intended to drive a wedge between South Korea and the US.
North and South Korea on Friday agreed to hold the talks after both sides extended olive branches earlier last week.
After boasting about North Korea's nuclear weapons capabilities in his New Year's address, Kim offered to send a delegation to the Pyeongchang Games in South Korea and said he sincerely hoped the event would be "a success," prompting Seoul to propose the meeting.
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