North Korea said during rare talks with the South on Tuesday it would send a delegation to the Pyeongchang Winter Olympics in South Korea next month and Seoul said it was prepared to lift some sanctions temporarily so the visit could take place.
At the first formal talks with South Korea in more than two years, North Korean officials said their delegation to the Games would consist of athletes, high-ranking officials and a cheering squad.
The talks are being closely watched by world leaders eager for any sign of a reduction in tension on the Korean peninsula, amid rising fears over North Korea's missile launches and development of nuclear weapons in defiance of United Nations Security Council resolutions.
South Korea has unilaterally banned several North Korean officials from entry in response to Pyongyang's ramped-up missile and nuclear tests, held despite international pressure.
However, some South Korean officials have said they see the Olympics as a possible opportunity for easing tension.
Foreign ministry spokesman Roh Kyu-deok said Seoul would consider whether it needed to take "prior steps," together with the UN Security Council and other relevant countries, to help the North Koreans visit for the Olympics.
At Tuesday's talks, the first since December 2015, Seoul proposed inter-Korean military discussions to reduce tension on the peninsula and a reunion of family members in time for February's Lunar New Year holiday, South Korea's vice unification minister Chun Hae-sung said.
The North has finished technical work to restore a military hotline with South Korea, he added, with normal communications set to resume on Wednesday. But Chun did not immediately say what information would be transferred along the hotline.
The North severed communications in February 2016, following the South's decision to shut down a jointly run industrial park in the North.
South Korea also proposed that athletes from both sides march together at the Games' opening ceremony and other joint activities during the Winter Olympics, Chun told reporters outside the talks.
Athletes from the two Koreas have paraded together at the opening and closing ceremonies of major international games before, although this has not been seen since the 2007 Asian Winter Games in China, after relations chilled under nearly a decade of conservative rule in the South.
It would also be the first time since 2005 that the North will send its female cheerleaders, dubbed the "cheering squad of beauty" by the South Korean media.
The meetings continued on Tuesday afternoon after the two sides broke up for separate lunches. Officials began speaking at 10 am in the three-storey Peace House just across the demilitarized zone on the South Korean side of Panmunjom truce village.
"North Korea said that they are determined to make today’s talks fruitful, and make it a groundbreaking opportunity," South Korea's Chun said.
Chun also said the South Koreans proposed resuming negotiations over the North's nuclear program, but there was no specific response from the North.
However, North Korean officials said during the meeting they were open to promoting reconciliation through dialogue and negotiation, according to Chun.
The head of the North Korean delegation, Ri Son Gwon, said, "We came to this meeting today with the thought of giving our brethren, who have high hopes for this dialogue, invaluable results as the first present of the year ..."
North Korea entered the talks with a "serious and sincere stance," said Ri, chairman of the North's Committee for the Peaceful Reunification of the Fatherland.
South Korean Unification Minister Cho Myoung-gyon expressed optimism as the meeting began.
"Our talks began after North and South Korea were severed for a long time, but I believe the first step is half the trip," said Cho. "It would be good for us to make that 'good present' you mentioned earlier."
"Everything feels slightly new as we have not had talks in a while," he said.
Just before the delegation drove into the demilitarized zone, about 20 South Koreans were seen waving a banner that read: "We wish the success of the high-ranking inter-Korean talks."
One man was spotted waving a flag with a unified Korean peninsula.
Each side's delegation consisted of five senior officials.
The North Korean delegation walked over the border inside the joint security area to the Peace House, an official from the South's Unification Ministry told reporters.
The United States, which has 28,500 troops stationed in South Korea as a legacy of the 1950-1953 Korean War, initially responded coolly to the idea of inter-Korean meetings, but US President Donald Trump later called them "a good thing."
Trump has said he would like to see talks go beyond the Olympics. "At the appropriate time, we'll get involved," he said.
On Tuesday, China's foreign ministry said it was happy to see talks between North and South Korea and welcomed all positive steps. Russia echoed the sentiment, with a Kremlin spokesman saying, "This is exactly the kind of dialogue that we said was necessary."
By Christine Kim and Josh Smith/Reuters
Additional reporting by Soyoung Kim and Hyonhee Shin in Seoul and David Brunnstrom, Jim Oliphant and Steve Holland in Washington; Editing by Michael Perry and Paul Tait.