To pave the way for the North's participation at Pyeongchang, South Korea had delayed the annual exercises with US forces, which usually take place between February and March, until after the Olympics.
All broke out in broad smiles.
A man impersonating US President Donald Trump (R) and another impersonating Kim Jong-un pose in the stands during the opening ceremony of the Pyeongchang 2018 Winter Olympic Games at the Pyeongchang Stadium on February 9, 2018.
Analysts say the North's Olympic diplomatic drive seeks to loosen worldwide sanctions against it and undermine the alliance between Seoul and Washington.
U.S. Vice President Mike Pence and his wife arrived after the handshakes.
"The DPRK has taken a big step forward to send Kim Jong Un's sister as a special envoy who carried his letter and invited President Moon to visit Pyongyang, showing that Pyongyang cares about the peace on the peninsula", he said.
The 23rd Winter Olympics in South Korea's eastern county of Pyeongchang had generated great interest as the world awaits to see if the leaders of the two Koreas meet at the opening ceremony of the games on Friday or after. There was another handshake.
But most South Korean fans were fixated on the ice hockey, where the combined North and South women's team appeared at a packed Kwandong Hockey Centre.
But any movement between the nations would also hinge on the United States, which has warned of further sanctions if North Korea continues to thumb its nose at calls to cease its weapons programs. Speaking to NBC's "Nightly News" on Thursday, the vice president continued to stress that the U.S. would protect itself from North Korean nuclear threats by taking whatever "action is necessary to defend our homeland".
A visit by Moon to the North would enable the first summit between leaders from the two Koreas since 2007, and would mark only the third inter-Korean summit to take place. Of course, if North Korea moves forward with new provocations - such as missile or nuclear tests - all bets are off. At the same time, the vice president has deliberately left the door open to a possible encounter with North Korean officials expected to be in attendance. Join us in a conversation about world events, the newsgathering process or whatever aspect of the news universe you find interesting or important. The four DPRK delegates will have a meeting and lunch with President Moon Saturday, according to South Korea's presidential Blue House.
Pence trip began in Japan, stopped in Seoul, and culminated with his visit to the Pyeongchang Winter Olympics opening ceremony.
"We wanted to show the alliance seated together".
Moon and Kim Yong Nam, the North's ceremonial head of state, will jointly attend the unified Korean women's ice hockey team's first match later Saturday evening.
The protesters set the flag alight along with a portrait of Kim Jong Un, whose sister was due to watch a Northern musical display with the South's President at a nearby theatre in Seoul.