Analysts were cautious about prospects for the negotiations, which would be the first since the North sparked outrage in the South in November with a deadly bombardment of a border island.

Washington welcomed Thursday's agreement on the military talks, which came a day after US and Chinese leaders called in a summit statement for "sincere and constructive dialogue" between the two Koreas.

"That is an important step forward. I think some of that comes as a result of yesterday's meeting here... clearly a positive step," said White House spokesman Robert Gibbs.

The North's official news agency said the peninsula "is in a critical moment of peace or war". It confirmed the North is willing to discuss two deadly border incidents that the South blames on its neighbour.

Cross-border relations have been sour since a conservative government in Seoul linked major aid to its neighbour's progress on nuclear disarmament.

They worsened sharply last May when the South accused the North of torpedoing one of its warships with the loss of 46 lives, a charge Pyongyang denies.

Tensions rose even higher after the North bombarded Yeonpyeong island, killing four people, including civilians.

The North said the shelling was in response to the South's artillery drill on the island near the disputed border, which dropped shells into what Pyongyang claims as its waters.

In an abrupt change of tack, the North this year has repeatedly called for talks.

Seoul's unification ministry, which handles cross-border affairs, stuck to its terms for dialogue -- that the North accept responsibility for the two attacks, promise no repetition and show sincerity about nuclear disarmament.

Spokesman Chun Hae-Sung Friday repeated demands that Pyongyang, in addition to the military dialogue, hold separate high-level talks on its nuclear programme.

The North has previously baulked at talking about its nuclear programme with the South, saying it was designed to deter US attacks and should be discussed with Washington.

The two Koreas are members of stalled six-nation nuclear disarmament talks also grouping China, Russia, the United States and Japan.

But Chun said denuclearisation "is a key security agenda, thus the (North's) sincerity must be confirmed between the North and the South as well".

The defence ministry said the South would next week suggest a date for a working-level military meeting -- probably to be held next month -- to prepare for the high-level talks.

Yang Moo-Jin of Seoul's University of North Korean Studies predicted "empty posturing" by both sides at the preparatory talks, given their deep mistrust.

"North Korea is likely to repeat denials of its responsibility for the warship sinking but express regret over civilian casualties from the shelling of Yeonpyeong," Yang told AFP.

He said the North would also renew demands for implementation of a summit agreement to set up a shared "peace zone" around the disputed Yellow Sea border.

Kim Yong-Hyun of Seoul's Dongguk University said the North's proposal was a response to the US and Chinese leaders.

"North Korea seeks to actively demonstrate its desire for tension reduction before the world and take the initiative in inter-Korean dialogue in the future," Kim said.

"It also wants to redeem the momentum for the resumption of the six-party talks by reopening inter-Korean talks. In the long term, it also wants to obtain aid if everything goes well."

Kim said neither side wants to be blamed for the collapse of dialogue, and preparatory talks would likely be followed by a high-level meeting.

"But chances are slim of any tangible results from the high-level talks in the foreseeable future."