The North Korean general and Ivanka Trump were cheering from the same stand - but not expected to meet
North Korea is willing to hold talks with the US, South Korea says.
The announcement came after Gen Kim Yong-chol met South Korean President Moon Jae-in before the closing ceremony of the Winter Olympics.
US President Donald Trump's daughter Ivanka also attended the ceremony, but US officials have ruled out meeting the North Korean delegation.
The US says North Koreans pulled out of a meeting with Vice-President Mike Pence during the opening ceremony.
The Korean peninsula has been divided since the 1950-53 war and the two sides have never signed a peace treaty.
The rapprochement between the two Koreas has been seen as a move by the North to drive a wedge between the South and the US.
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Experts have cautioned that the latest developments do not put an end to underlying regional tensions, particularly following last year's nuclear and missile tests carried out by the North.
Medals and mediation
By Stephen McDonell, BBC News, Pyeongchang
The Pyeongchang Winter Olympics ended as it started with geopolitics being played out in a packed stadium and in front of a global television audience.
The US president's daughter, Ivanka Trump, sat one row in front of North Korean general Kim Yong-chol. Two seats down from him was Gen Vincent Brooks, commander of US forces in South Korea and in the middle of them all - Moon Jae-in, giving handshakes all round.
South Korea's President Moon has tried to bring Washington and Pyongyang together at these Olympics. He's met two rounds of delegations from both countries and his message has been clear: You need to talk.
We could be some way off any major discussions between them - we have heard of the North's readiness to talk to the US before and it's led to nothing. But coming after a period of such high tension on the Korean peninsula, this does seem to show a shift in mood all round.
And, if there is a breakthrough of sorts, many will remember President Moon's Winter Olympic strategy as the time it all began.
General 'willing' to talk
While South Korea's president held out a hand to Gen Kim, not everyone in his country was as accepting.
Gen Kim has been accused of orchestrating attacks on the Cheonan warship and Yeonpyeong Island in 2010, leading to the death of 46 South Korean sailors.
He arrived in the South with families of the victims and conservative MPs trying to block his entry.
South Koreans protested against the general's visit
According to Mr Moon's office, he said North Korea was "very willing" to hold talks with the US.
It added that the North had "agreed that inter-Korea talks and North-US relations should improve together".
Pyongyang has not yet commented. But it has often said it is willing to talk without any preconditions.
However, the US has insisted that concrete steps towards denuclearisation take place first.
The revelation from the South Korean presidency came hours after a furious statement from the North that described fresh sanctions announced by Washington as "an act of war".
Pyongyang's foreign ministry praised the way the two Koreas had co-operated together during the Olympics, but said the US had "brought the threat of war to the Korean peninsula with large-scale new sanctions" just as the Games were coming to a close.
Could there be a breakthrough this time?
South Korean media is abuzz with suggestions that North-US talks could still take place while the respective delegations are in town.
The BBC's Laura Bicker, in Pyeongchang, asked an official from South's government if the meeting could take place in the next two days, and the answer was: "We will see."
North Korea has sent an eight-person team across the border, including officials responsible for its nuclear programme and diplomats in charge of US issues.
Meanwhile, Allison Hooker - a Koreas specialist from the US National Security Council - is part of the US delegation. She met Gen Kim in 2014 in North Korea, as the US tried to free two American detainees.
The scene could be set for a more low-key meeting than the failed attempt with Mr Pence.
He was set to meet Kim Yo-jong, the sister of North Korean President Kim Jong-un, at the start of the Games, but it was cancelled inexplicably by the North Koreans, according to the US officials. North Korea made no comment.
Mike Pence was seated directly in front of the North Korean delegation at the opening ceremony
There has been no official interaction between North Korea and the Trump administration.
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