Georgia and Russia recently exchanged the bodies of fallen fighters
Talks between Georgia and Russia aimed at defusing tensions after their brief war in August have made substantial progress, diplomats in Geneva say.
Mediators said there was genuine agreement that security in the region must be improved and that refugees must be allowed to return to their homes.
But major differences over the status of Georgia's rebel areas of South Ossetia and Abkhazia were set aside.
The talks were mediated by representatives of the UN, EU and OSCE.
Delegates from South Ossetia and Abkhazia were also at the meeting.
It follows insistence from Russia - which has recognised them as independent states - that they be included.
Georgia had argued that they were integral parts of its territory, and therefore should not be treated in Geneva as independent countries.
The first round of talks last month collapsed after one day, and the Russian and Georgian teams were never even in the same room together.
This time though, all parties were in the negotiating room, but none was wearing an official government badge.
One proposal put forward was the introduction of an international police force to patrol the ceasefire lines and protect refugees and vulnerable groups, said UN negotiator, Johan Verbeke.
On Tuesday, Amnesty International said in a report that more than 20,000 ethnic Georgians were still unable to return to their homes in South Ossetia following the five-day conflict in August.
Its report said a "twilight zone" had been created along the de facto border between Georgia and its rebel region, "into which people stray at their peril".
The BBC's Imogen Foulkes in Geneva says despite the cordial atmosphere at the meeting, nothing is going to change overnight.
Far from returning home, displaced people will get more permanent shelters instead of the tents they are currently living in - more than 6,000 huts will be built and allocated before winter sets in.
French Foreign Minister Bernard Kouchner, whose country brokered a ceasefire between the two sides in August, has admitted that Russia has not yet withdrawn the agreed number of troops from South Ossetia.
Meanwhile the UN and the EU are to draw up proposals for improving security - and all sides will meet again, in Geneva, in December.