India and Pakistan have begun their first formal talks in nearly three years, with Kashmir high on the agenda.
The meetings are being billed as "talks about talks"
Three days of landmark discussions in the Pakistani capital, Islamabad, are designed to pave the way for full peace talks between the nuclear rivals.
The countries have fought two wars over Kashmir since independence in 1947, but a ceasefire is now in effect.
Both India and Pakistan said the first day of talks had been held in a "cordial and constructive" atmosphere.
Pakistan Foreign Ministry spokesman Masood Khan said the two sides realised war was not an option.
"You have to look at ways to find a peaceful resolution of the outstanding disputes between the two countries," he told reporters in Islamabad.
In Delhi, Indian Foreign Ministry spokesman Navtej Sarna said officials were focusing on working out a timetable and framework for discussions.
"Some proposals were made in this regard," he told a news conference.
India had decided to free eight Pakistani civilians, four of them boys, who had been detained after straying across
the border, he said.
Meanwhile, in Indian-administered Kashmir, suspected separatist rebels - who are not observing the ceasefire - killed a local politician on Monday.
Ghulam Mohammad Dar, a member of the state's main governing party, and a police guard were shot dead near the summer capital, Srinagar.
Vajpayee (L) and Musharraf agreed to talks at a summit last month
Tens of thousands of people have died since militants took up arms against Indian rule in 1989.
BBC correspondents say observers believe India and Pakistan have come to the dialogue with a new recognition that the conflict in Kashmir cannot be won by military means.
But they say no one expects any concrete results from these initial meetings.
The talks on the first two days are being held between relatively junior officials.
On Wednesday, the two sides' foreign secretaries will meet. Analysts say the Kashmir issue might be taken up then.
Confidence-building measures in the nuclear field and security issues are also expected to be on the agenda.
The Islamabad meetings are the culmination in a thaw which began last April.
The decision to hold talks was announced when Pakistani President Pervez Musharraf and Indian Prime Minister Atal Behari Vajpayee met on the fringes of a regional summit in Islamabad last month.
The leaders agreed the talks would focus on all contentious issues affecting bilateral ties.
Such a "composite dialogue" was previously opposed by Pakistan, which had demanded Kashmir be tackled before other matters.
Observers are cautiously optimistic, saying there has been a change in thinking on both sides since they last met in the Indian city of Agra three years ago.
Those talks ended in failure, but this time the process is more methodical and not burdened by sky-high expectations of success, observers say.
A number of confidence-building measures have been introduced over the past eight months, including a resumption of rail, air and bus links and a strengthening of diplomatic ties.
At the weekend, India confirmed its cricketers would tour Pakistan in March - despite security concerns.