The Koreas have sat down for a second round of talks at a border village as a call from the North for a delay of annual South Korea-US military drills threatened plans for reunions of war-divided families.
The talks that started on Friday have no fixed agenda and the first round on Wednesday ended without any tangible progress.
Seoul wants Pyongyang to guarantee that the resumption of planned reunions for relatives divided by the 1950-53 Korean War will take place as scheduled at the North's Mount Kumgang resort from February 20 - 25.
North Korea, for its part, is insisting that its neighbour must postpone the start of its annual military drills with the US, scheduled for February 24, until after the reunions are over.
The spat has provoked worries that Pyongyang may cancel any family reunions that overlap with the first two days of the military drills, the Associated Press news agency reported.
North Korea calls the military exercises a rehearsal for invasion, while South Korea and the US say they are defensive in nature.
A year after dramatically raising tension with repeated threats of nuclear wars and vows to bolster nuclear capability, the North has recently pushed for better ties with Seoul
The talks are the highest level between the rival countries in seven years and the first substantive follow-up to statements made by the leaders of both countries expressing a desire for improved ties.
The North has refused to discuss nuclear issues in the talks, according to South Korea’s Unification Ministry.
Pyongyang has so far concluded three nuclear tests and launching rockets into orbit - a move widely seen by its critics as cover for testing ballistic missile technology to carry nuclear weapons.
Warning from Kerry
On Thursday, US Secretary of State John Kerry and his South Korean counterpart Yun Byung-se warned North Korea against any possible aggression, saying the North should not use the military exercises as an excuse to stay away from talks or to delay attempts to improve ties.
A compromise between the archrivals on the overlapping family reunions and military drills is likely to be perceived by the international community as a mutual willingness to explore deals on other more controversial issues.
The Korean Peninsula technically remains in war because the Korean War ended with a cease-fire agreement, but not a peace treaty.