Moon hosted talks and a lunch with Kim Yo Jong, the younger sister of the North Korean leader, at the presidential Blue House in Seoul.
USA vice-president Mike Pence, who was seated in the same box, did not interact with the North Koreans at any point, United States officials said.
And yet, I'll bet dollars to donuts some people took pictures and texted "OMG CAN YOU BELIEVE IT" to friends because, well, they themselves believed it.
Kim Yo Jong is the first member of the ruling Kim family bearing the bloodline of the sacred Mount Paektu, a centerpiece of the North's idolization and propaganda campaign, to cross the border into the South since the 1950-53 Korean War.
Moon is joined by his national security director, intelligence chief, chief of staff and the unification minister.
North Korea has made clear that it does not intend to negotiate away its nuclear and missile programs in return for relief from worldwide sanctions.
She shook hands with Moon and smiled faintly as the South Korean leader entered a meeting room at the Blue House on Saturday.
Moon's office says Kim's sister, Kim Yo Jong, came to the South as his special envoy. "I thought things would be unusual and very different, but I found a lot of things being similar", Kim said while proposing a toast at Sunday's dinner, according to Moon's office.
Moon has already put a summit offer on the table.
Tensions between the two soared previous year as Pyongyang tested missiles capable of reaching the US mainland and its most powerful nuclear device to date, while Kim Jong Un and US President Donald Trump traded personal insults and threats of war.
The South Koreans want to use the Olympics to ease tensions spurred by North Korea's pursuit of nuclear weapons.
At the age of 30, Kim Yo Jong is quite possibly the most powerful woman in North Korea. They were stopped and most were killed near the palace, which was newly rebuilt in 1991.
He also did not shake hands with Kim Yong Nam while making a brief appearance at a leaders' reception ahead of the ceremony - although Japanese Prime Minister Shinzo Abe, whose country is also regularly threatened by Pyongyang, did so, while exchanging pleasantries with the North Korean. Moon had earlier met Kim Yong Nam during a dinner he hosted for visiting dignitaries.
North and South Koreans marching together under a unified peninsula flag gave Thomas Bach goosebumps, the International Olympic Committee president told Reuters on Saturday.
Abe is expected to urge Moon to steadily implement the deal, arguing that Japan has been carrying out its promises, Japanese government officials said.
Such moves appeal to the people who voted for Moon in 2017, as he is widely known as a North Korea-friendly politician and was looking for opportunities to open a negotiation channel with Pyongyang.
As if to drive the point home, Kim Jong Un used the eve of the Olympics to throw a massive military parade in Pyongyang that was highlighted by several huge intercontinental ballistic missiles rolled out in launcher trucks.
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