Greek and Turkish Cypriot leaders on Saturday agreed to a timetable for negotiations and a set of principles to govern a reunified Cyprus.
Cyprus was split when Turkey invaded in 1974 in response to a Greek Cypriot coup encouraged by the military government in Athens. Ankara does not recognise the Greek Cypriot government.
Greek Cypriots represent Cyprus in the 25-member European Union and could use their veto to prevent Turkey's membership.
"This is a very historic occasion," Ibrahim Gambari, the UN under secretary-general, told reporters after hosting a meeting between President Tassos Papadopoulos, the Greek Cypriot leader, and Mehmet Ali Talat, his Turkish Cypriot counterpart, in Nicosia.
The two agreed on a twin-track process involving at one level discussions on day-to-day issues to boost confidence, and at another, talks on more contentious political subjects.
These would include matters ranging from troop withdrawals to governance in a reunited Cyprus, subjects on which the two sides have disagreed strongly in the past.
Turkey still has 35,000 troops in northern Cyprus.
Papadopoulos said it was likely to be an uphill task. "This was an agreement to start a process. Of course, difficulties may appear in the discussions of substance," he told reporters.
In April 2004 Greek Cypriots rejected a UN plan to link the island's two communities in a loose federation - a plan the Turkish Cypriots accepted.
Gambari said there was a commitment to the reunification of Cyprus and a recognition that the present situation was unacceptable.
The EU is due to assess Turkey's entry preparations in October. EU leaders have warned Turkey it risks a suspension of entry talks unless it gives all Cypriots trade access to the country.