Both sides emerged smiling after Saturday's meeting between Lal Krishna Advani and four members of the All Party Hurriyat Conference, an umbrella separatist group.
"We're going forward and not backwards and there is a change in thought and attitude at the ground level," said Abd al-Ghani Bhatt, a Hurriyat spokesman.
The talks are the second to be held since January as part of a precedent-setting dialogue to halt the conflict in disputed Kashmir, which has claimed tens of thousands of lives since erupting in 1989.
Advani said a third meeting with the Hurriyat leaders would follow in June.
"It may be the first meeting where substantive issues can be discussed," he said.
Facing a general election next month, the government has made its peace moves with Pakistan and its efforts to end the Kashmir revolt key planks in its campaign.
The separatists said the meeting reviewed progress on alleged human rights abuses by troops, which they had said would be a key issue in the discussions, as well as the release of political prisoners.
"Human rights issues have improved in Kashmir," said Bhatt.
Advani said he had given orders that security forces "must have a human face" while discharging their duties in the heavily militarised region and "try to see that ordinary citizens are not subjected to any harassment".
Advani said the government had released 69 prisoners since the January meeting. However, the separatists say there are at least 1500 prisoners they want freed.
Shortly before the talks, Maulana Abbas Ansari, leader of the delegation, said he would press New Delhi for permission to travel to neighbouring Pakistan for talks on the region's future. There was no immediate news of whether India had dropped its objections.
The talks came as Hurriyat has split between those who favour dialogue with New Delhi and hardliners who oppose it.