Leaders of the South Asian Association of Regional Cooperation (Saarc) have been meeting in the Indian capital, Delhi, as part of a regional summit.
The theme of the summit is connectivity
They have pledged to build better transport and trade links and welcomed Afghanistan as their newest member.
The regional body is also expected to admit Iran as an observer.
Previous summits have suffered because of the rivalry between India and Pakistan but improved relations between them is seen as a hopeful sign.
Opening the summit, Indian Prime Minister Manmohan Singh said, "We must now make a break with the past and join hands to realise our shared destiny.
"The question before us is whether we will seize this unique opportunity that beckons," he said and added, "The time has come to move Saarc from a declaratory phase to action and implementation."
Mr Singh said historically South Asia had flourished most when it was connected to itself and the rest of the world.
Pakistan's Prime Minister Shaukat Aziz said the time had come for conflict management to be set aside so that the regional body could address their common goals of economic prosperity and energy security.
President Mahinda Rajapakse of Sri Lanka said that recent attacks by the Tamil Tigers posed a threat to all.
Afghanistan was formally welcomed as the regional body's eighth member.
President Hamid Karzai said his country could serve as an important link between Central and South Asia and East Asia and the Middle East.
At present, Pakistan does not allow India to ship goods to Kabul by land through its territory.
Without naming Pakistan, President Karzai called for the lifting of barriers "that inhibit the movement of people and goods between our countries".
He added that "particular attention should also be directed to landlocked members... we must not allow narrowly defined interests to trump the benefits of free-flowing trade in the region."
The theme for this year's summit is connectivity, with terrorism also on the agenda.
The BBC's Sanjoy Majumder says that for a region that is home to one-fifth of the world's population with strong historical and cultural links, trade and transport ties between them are astonishingly poor.
Despite a regional free trade agreement that came into effect last year, commercial transactions between these countries make up a mere 5% of their GDP, compared to 35% for the European Union.
Saarc is a grouping of eight South Asian countries and was formed in 1985.