AFP Hwang Sunghee
Seoul urged that reunions of families divided by the 1950-53 Korean War -- one of the most emotive legacies of the conflict -- be held at the same time as the Games.
And the two sides agreed to restore a military hotline closed since February 2016 to improve communications between their armed forces, the South's vice unification minister Chun Hae-Sung said.
The talks were held in Panmunjom, the truce village in the Demilitarized Zone that splits the peninsula, with the North's group walking over the Military Demarcation Line to the Peace House venue on the southern side -- just yards from where a defector ran across in a hail of bullets two months ago.
"The North side proposed dispatching a high-level delegation, a National Olympic Committee delegation, athletes, supporters, art performers, observers, a taekwondo demonstration team and journalists" to the Games, Chun told reporters.
Looking businesslike, the South's Unification minister Cho Myoung-Gyon and the North's chief delegate Ri Son-Gwon shook hands at the entrance to the building, and again across the table.
Ri wore a badge on his left lapel bearing an image of the country's founding father Kim Il-Sung and his son and successor Kim Jong-Il, while Cho sported one depicting the South Korean flag.
In addition to resuming family reunions, Seoul suggested the two teams march together at the opening ceremony. It also called for talks between the countries' Red Cross organisations and military discussions to prevent "accidental clashes".
"Let's present the people with a precious new year's gift," said the North's Ri. "There is a saying that a journey taken by two lasts longer than the one travelled alone."
The atmosphere was friendlier than at past meetings, and Cho told Ri that Seoul believed "guests from the North are going to join many others from all around the world" at the Olympics.
"The people have a strong desire to see the North and South move toward peace and reconciliation," he added.
- 'Peace Olympics' -It was a radically different tone from the rhetoric of recent months, which have seen the North's leader Kim Jong-Un and US President Donald Trump trade personal insults and threats of war.
Pyongyang has defied international pressure in recent months and launched missiles capable of reaching the US mainland, as well as carried out its sixth and most powerful nuclear test to date.
Seoul has been keen to proclaim the Games in Pyeongchang, just 80 kilometres (50 miles) south of the DMZ, a "peace Olympics" but it needs Pyongyang to attend to make the description meaningful.
Kim first indicated the North could take part in his New Year's speech and Seoul responded with an offer of high-level dialogue.
Last week, a civilian hotline between the neighbours was restored after being suspended for almost two years.
Issues remained to be settled including the size of Pyongyang's delegation. Only two athletes from the country have qualified for the Games so far, but hundreds of young, female North Korean cheerleaders have created a buzz at three previous international sporting events in the South.
The group may stay on a cruise ship in Sokcho, about an hour's drive from the Olympic venue, which would enable their movements to be closely monitored and controlled.
A high-level delegation accompanying the team could include Kim's younger sister Yo-Jong, who is a senior member of the ruling Workers' Party, according to South Korean reports.
- Beyond the Games -Both sides expressed the desire to address wider questions than the Games. But Pyongyang has snubbed previous attempts by Seoul to set up further family reunions, saying it will not do so unless several of its citizens are returned by the South.
"The two sides will reach a smooth agreement on Pyeongchang but what happens afterwards?" said Koh Yu-Hwan, a professor at Dongguk University.
"In terms of pending issues regarding the improvement of inter-Korean ties, it won't be easy to immediately reach an agreement."
It was not clear whether the North had sought to discuss a permanent end to large-scale annual military drills between Seoul and Washington.
The North's Rodong Sinmun newspaper -- the ruling party's official daily -- made no mention of the talks Tuesday but said that US policies focused on sanctions and aimed at raising pressure against North Korea had failed and Pyongyang had become "an international nuclear power".
The United States and South Korea agreed last week to delay their Foal Eagle and Key Resolve military exercises until after the Games, apparently to help ease nerves.
Trump said at the weekend he hoped the rare talks between the two Koreas would go "beyond the Olympics" and that Washington could join the process at a later stage.
But US ambassador to the United Nations Nikki Haley said that there was "no turnaround" in the US stance, reiterating that the North must stop nuclear tests for talks with Washington.
© Agence France-Presse