* North, South Korea hold first formal talks since December 2015
* Family reunions, easing military tension also proposed
North Korea said during rare talks with the South on Tuesday it will send a delegation of high-ranking officials, athletes and a cheering squad to the Pyeongchang Winter Olympics in South Korea next month, according to a senior South Korean official.
Seoul proposed inter-Korean military talks to reduce tensions on the Korean peninsula and a reunion of family members in time for February's Lunar New Year holiday, said South Korea's vice unification minister Chun Hae-sung.
South Korea also proposed that athletes from the two Koreas march together at the Games' opening ceremony and other joint activities between the two nations during the Winter Olympics, Chun told reporters outside the first formal talks between North and South Korea in more than two years.
The talks are being closely watched by world leaders eager for any sign of a reduction in tensions on the Korean peninsula amid rising fears over North Korea's missile launches and development of nuclear weapons in defiance of United Nations Security Council resolutions.
The meeting was to continue on Tuesday afternoon after the two sides broke up for separate lunches. It began at 10 am in the three-storey Peace House just across the demilitarised zone on the South Korean side of Panmunjom truce village.
"North Korea said that they are determined to make today’s talks fruitful, and make it a groundbreaking opportunity," Chun said.
Chun also said the South Koreans proposed resuming negotiations over the North's nuclear programme but there was no specific response from the North Koreans.
However, North Korean officials said during the meeting they were open to promoting reconciliation between the two countries through dialogue and negotiation, according to Chun.
The head of the North Korean delegation, Ri Son Gwon, said in opening remarks: "We came to this meeting today with the thought of giving our brethren, who have high hopes for this dialogue, invaluable results as the first present of the year ..."
North Korea entered the talks with a "serious and sincere stance", said Ri, chairman of the North's Committee for the Peaceful Reunification of the Fatherland.
South Korean Unification Minister Cho Myoung-gyon expressed optimism as the meeting began.
"Our talks began after North and South Korea were severed for a long time, but I believe the first step is half the trip," said Cho. "It would be good for us to make that 'good present' you mentioned earlier."
Pointing to his briefcase before departing for the border, Cho smiled and said: "I have a bit of luggage."
"Everything feels slightly new as we have not had talks in a while," he said.
Just before the delegation drove into the demilitarised zone, some 20 South Koreans were seen waving a banner that read: "We wish the success of the high-ranking inter-Korean talks".
One man was spotted waving a flag with a unified Korean peninsula.
The delegations were made up of five senior officials from each side.
The North Korean delegation walked over the border inside the joint security area to the Peace House around 0030 GMT, an official from the South's Unification Ministry told reporters.
The United States, which has 28,500 troops stationed in South Korea as a legacy of the 1950-1953 Korean War, initially responded coolly to the idea of inter-Korean meetings, but US President Donald Trump later called the talks "a good thing".
Trump has said he would like to see talks go beyond the Olympics. "At the appropriate time, we'll get involved," he said.