Kim Jong-il, whose ties with the current Seoul government are frosty, sent condolences after Kim Dae-jung died on Tuesday.
"The government plans to accept the North Korean funeral delegation out of respect for the wishes of the bereaved family members and in consideration of inter-Korean relations," Chun Hae-sung, the unification ministry spokesman, said.
The North's official news agency has said the delegation would visit the South from Friday to Saturday - indicating it had chosen not to be present at Sunday's funeral which Lee Myung-bak, the president, is expected to attend.
The North Korean government remains hostile to Lee, who rolled back the "sunshine" policy.
But analysts said the decision to skip the funeral was not necessarily a snub.
"It is not unusual for North Korean delegates to pay tribute but not to attend a funeral," Kim Yong-hyun of Seoul's Dongguk University told AFP news agency.
He also said there was a similar decision in 2001 at the funeral of Chung Ju-young, the former Hyundai group chairman.
"Neither Seoul nor Pyongyang want to see any unexpected or awkward situations with North Koreans present at the funeral."