Manmohan Singh, the Indian prime minister, read out a joint statement with Pervez Musharraf, the Pakistani president, in which he said it was agreed that the peace process "must be maintained".
"We instructed our foreign ministers to resume direct talks," he said on Saturday.
Talks were suspended in July after a series of bombings on trains in Mumbai killed more than 180 people. India blamed the attacks on Pakistan militants.
Musharraf had earlier expressed hope on Friday that his meeting with Singh could lead to a ceasefire along two countries' shared border in the Himalayan mountains.
"A historic opportunity like this must be seized by the leadership of the two countries to bring to a close the chapter and tension in our region," he said.
Dozens of armed groups are waging a bitter conflict to make Kashmir either independent from mostly Hindu India or merge with Muslim-dominated Pakistan in an insurgency that has claimed about 65,000 lives.
India has blamed Pakistan's support for the fighters for stalling the peace process between the two nuclear powers, who have fought three wars since gaining independence from Britain in 1947.