A North Korean general blamed for killing 46 South Korean seamen is attending the closing ceremony of the Winter Olympics in Pyeongchang.
Gen Kim Yong-chol met President Moon Jae-in hours after families of the victims and South Korean conservative MPs tried to block entry at the border.
The Korean rapprochement has been seen as a move by the North to drive a wedge between the South and the US.
US President Donald Trump's daughter Ivanka is attending the ceremony.
US officials have ruled out meeting the North Korean delegation.
On Friday, Washington announced a set of fresh sanctions against the North.
The North reacted furiously on Sunday, saying it considered the restrictions "an act of war".
A statement by the 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.
The Korean peninsula has been divided since the 1950-53 war and the two sides have never signed a peace treaty.
North and South Korea marched under one flag at the opening ceremony, and fielded a unified women's ice hockey team.
But 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.
Who is Gen Kim?
The 72-year-old is a former military intelligence chief. He is leading the eight-member North Korean delegation to the Olympic closing ceremony later on Sunday.
During his time in office, Gen Kim was accused of orchestrating attacks on the Cheonan warship and Yeonpyeong Island in 2010.
He was also linked to a cyber-attack on Sony Pictures in 2014 in a bid to block the release of The Interview, a comedy film based on the North Korean regime.
Gen Kim rose to prominence as Pyongyang's chief military negotiator during inter-Korean talks, between 2006 and 2008.
He later served as the director of the General Reconnaissance Bureau, tasked with cyber-warfare and gathering foreign intelligence, from 2009 to 2016.
In 2016, he took charge of the United Front Department, the civilian intelligence agency which supposedly operates pro-North Korean groups in South Korea and handles inter-Korean affairs.
Isn't the general under sanctions?
Yes. Washington imposed sanctions on Gen Kim in 2010 and 2015, and Seoul did the same in 2016.
However, South Korea's Unification Minister Cho Myoung-gyon has clarified that there are no restrictions on his travel to the Olympics.
Despite conservative protests, the South Korean government has welcomed his visit, and South Korean President Moon Jae-in is expected to meet the delegation.
How is the US reacting to the North-South thaw?
President Donald Trump is viewing the moves with suspicion.
He sent his Vice-President Mike Pence to the opening ceremony - attended by North Korean leader Kim Jong-un's sister, Kim Yo-jong, among others.
And a meeting between the two was cancelled inexplicably by the North Koreans, US officials have said. North Korea has made no comment on the US reports.
It would have been the first official interaction between North Korea and the Trump administration.
Last Friday, Mr Trump warned of serious consequences if the latest round of sanctions did not generate results.
"If the sanctions don't work we'll have to go phase two - and phase two may be a very rough thing, may be very, very unfortunate for the world," he said.
He did not specify what "phase two" would entail.