Mr Bush stood close to the North Korean border
Standing at the demilitarised zone on the border, he said: "That road has the potential to bring the peoples on both sides of this divided land together."
Earlier, in the capital Seoul, Mr Bush said he strongly supported South Korea's "sunshine policy" aimed at engaging with the communist North and said the US had no intention of invading North Korea.
But there have been angry protests at Mr Bush's visit. Hundreds of protesters clashed with riot police in Seoul on Wednesday.
Several protesters were injured in fighting, which broke out when police tried to stop activists from burning a US flag.
Mr Bush has been seeking to ease worries in Seoul over his recent State of the Union address, in which he described the North as part of an "axis of evil".
He said the remark had been directed, not at the people, but at the leadership in Pyongyang.
South Korean President Kim Dae-jung, appearing with Mr Bush, called on North Korea to resume the bilateral talks it broke off last year.
"I earnestly hope that the North Korean authorities will soon respond to our sincere proposal for dialogue," Mr Kim said.
'Deeply concerned'
Earlier, following talks with Mr Kim in Seoul, Mr Bush repeated that the US was open to dialogue with Pyongyang, but was awaiting a response.
But he also said he would not change his opinion of North Korean leader Kim Jong-il "until he frees his people".
"I'm deeply concerned about the people of North Korea and I believe it is important for those of us who love freedom to stand strong for freedom," he said.
Mr Bush stressed he did not want war with the Stalinist state.
"We have no intentions to invade North Korea," he said. "We are purely defensive, we are peace loving and it is in our nation's interests to have peace on the peninsula."
But he said North Korea had to demonstrate that it did not intend to threaten its southern neighbour as the US would honour its commitment to defend South Korea if necessary.
North and South Korea remain technically at war as they never signed a peace treaty to end the 1950-53 war.