Delegations from both countries continued talks in Pyongyang on Saturday, the second day of four-day cabinet-level meetings.
At the talks, Lee Jong-seok, South Korea's unification minister, "encouraged North Korea to return to six-nation talks on the North Korean nuclear issue and proposed discussing the issue of abductees and POWs as a way to address a tragic suffering caused by the national division."
Seoul estimates that 486 South Korean civilians abducted by the North are alive in North Korea. It also says the North is holding 542 others taken prisoner as soldiers during the 1950-53 Korean War.
There has been no immediate indication of the North's response to the proposals.
The two issues were the main topics the South hopes to focus on in the current talks, which run until Monday.
The South has previously raised the abductee and prisoner issues with North Korea but has failed to achieve a breakthrough.
The North denies holding any war prisoners and says the civilians defected voluntarily.
North Korea has stayed away from the nuclear negotiations with China, Japan, South Korea, Russia and the United States since November, protesting financial restrictions imposed by Washington for Pyongyang's alleged wrong-doings, including currency counterfeiting.