Prior to the Games, the sides will carry out joint training for skiers at the North's Masik Pass resort and a cultural event at the Mount Kumgang resort, for which Seoul officials plan to visit the sites next week.
"Under the circumstances where inter-Korean (relations) are extremely strained, in fact just some 20 days ago we weren't expecting North Korea would participate in the Olympics", said Chun Hae-sung, the South's chief negotiator and vice unification minister.
"It would have a significant meaning if the South and North show reconciliation and unity, for example through a joint march".
The North Korean delegation will begin arriving in South Korea on Jan. 25, according to the joint statement.
The North will separately send a 150-strong delegation to the Paralympics, Chun said.
'It's not the time'
Twenty nations meeting in the Canadian city of Vancouver agreed on Tuesday to consider tougher sanctions to press North Korea to give up its nuclear weapons and US Secretary of State Rex Tillerson warned the North it could trigger a military response if it did not choose dialogue.
Japanese Foreign Minister Taro Kono said the world should not be naive about North Korea's "charm offensive" over the Olympics.
"It is not the time to ease pressure, or to reward North Korea", Kono said. "The fact that North Korea is engaging in dialogue could be interpreted as proof that the sanctions are working."
North Korean leader Kim Jong-Un has refused to give up development of nuclear missiles capable of hitting the United States in spite of increasingly severe UN sanctions, raising fears of a new war on the Korean peninsula. The North has fired test-fired missiles over Japan.
Earlier on Wednesday, state media warned the US of "meddling" in inter-Korean issues at a time when it had to "mind its own destiny rushing headlong into self-destruction".
"The U.S. is miscalculating," the North's Rodong Sinmun newspaper said in a commentary. "Although the US makes desperate efforts to disturb peace while wielding a nuclear stick, it can not provoke us as long as we have the strong nuclear deterrent".
Seoul has proposed a joint ice hockey team, which triggered an angry response from athletes in the South suddenly being told they may have to play alongside total strangers.
"I don't know if it will happen, but a joint team will be a good opportunity for ice hockey to shed its sorrow as a less-preferred sport as many Koreans will take interest," South Korean President Moon Jae-in told players during a visit to a training centre.
The number of petitions to the presidential Blue House's website opposing a unified team shot up to more than 100 this week, with the most popular one garnering more than 17,000 votes.
"This isn't the same as gluing a broken plate together," said one of the signers.
The prospect of a combined team had long been unsettling for the South Korean players. As in most other winter sports, the South is much stronger than the North.
"Our players were really nervous," Sarah Murray, South Korean women's hockey head coach, told Reuters last month during the team's training swing through the United States.
"We can only take 23 players to the Olympics, and they thought these North Koreans are going to come in and take our spots", Murray said.
Chun, the South's lead delegate, said the decision on a united ice hockey team is not yet finalised, as it requires the consent of the IOC and related international body.
"We're well aware of the people's concerns and interests about this", he told a news conference.
"But I would like you to see the other side that it could make a positive contribution to peace of the Korean Peninsula and improving inter-Korean relations".
On Tuesday, the North said a 140-person orchestra would perform in South Korea during the Games. Pyongyang is also planning to send a large delegation in addition to the athletes and orchestra.
Paik Hak-soon, the director of the Centre for North Korean studies at Sejong Institute in South Korea, said North Korea was using the cheering squad to draw attention to its apparent cooperative spirit.
"Seeing good results in competitions thanks to the cheering squad would enable the North Koreans to say they contributed to a successful Olympics and the South Korean government would likely agree," said Paik.
"In the end, they are using this old tactic to get to Washington through Seoul."
Reclusive North Korea and the rich, democratic South are technically still at war because their 1950-53 conflict ended in a truce, not a peace treaty. The North regularly threatens to destroy the South, Japan and their major ally, the United States.
China, which did not attend the Vancouver meeting, said on Wednesday the gathering showed a Cold War mentality and would only undermine a settlement of the North Korea problem.