Mr Kim left Mr Roh to discuss with his senior officials details of a possible peace deal, as well as billions of dollars in aid and investment assistance to develop the bankrupt North's Soviet-era infrastructure. The talks continued at a state banquet.

North Korean state media described Pyongyang as 'wrapped in a festive mood' for the visit, which it said opened a 'new phase' for peace, prosperity and eventual unification.

Mr Roh, who hopes for concrete results from the summit to burnish his legacy, would like to make progress towards turning the armistice that ended the Korean war into a peace treaty, and to advance the six-nation process aimed at denuclearising North Korea. Analysts are sceptical about how much he will accomplish.

The two leaders are expected to meet several times in the next two days. South Korean officials expressed optimism after Mr Kim's surprise welcome, despite his dour demeanour.

Mr Roh's 300-strong delegation left Seoul early yesterday. He, his wife and 13 aides stepped from their heavily armoured limousines to walk across the world's most heavily fortified border.

'After I return home, many more people will do likewise,' he said. 'Then this line of division will finally be erased and the barrier will break down.'

Earlier, he vowed to 'close the gap in understanding between the two Koreas', while acknowledging obstacles lay ahead despite the progress already made.

The 248km border marks one of the sharpest political and economic divides anywhere, with Seoul portraying itself as the world's most wired city and Pyongyang widely considered one of the most isolated and withdrawn.