At Monday's talks, Kim Kye-gwan, North Korea's chief nuclear negotiator, and Christopher Hill, his American counterpart, discussed how to resolve problems between the countries which have been foes since the Korean war.
"The pathway is open to them. There is also another pathway of isolation ... if they do not perform"
Sean McCormack, US State Department
Sean McCormack, the US state department's spokesman, played down expectations of any breakthrough.
"I would expect that it ... would take some time in order for that process to be completed," he said.
"It would be a matter of building up trust, it would be a matter of performance and today is just an initial discussion.
"Underlying all of this, North Korea can realise a different kind of relationship with the rest of the world," he added.
"The pathway is open to them. There is also another pathway of isolation ... if they do not perform."
On the meeting agenda are trade sanctions and the US government's designation of North Korea as a state sponsor of terrorism, the State Department said.
The US will also seek North Korea's assurances that it will follow through on the agreement to shut down its main nuclear reactor by April.
On the alleged diversion of UNDP funds, David Morrison, a UNDP spokesman, said the suspension was decided after North Korean officials asked to reopen discussions on revamping its operations, a matter which it thought was closed.
"They want to discuss again a further narrowing of the programme," Morrison said.
The UNDP had said, among other things, that it would not pay in hard currency and not hire local staff through North Korean ministries, but Pyongyang wants to revisit these issues.
Morrison said the UN body would wait for further word from North Korea before deciding whether to pull out its eight international staff in the relatively small programme.
The UNDP has some 20 projects with a budget of $4.4 m, including training for food management and biodiversity.