They will field a joint women's ice hockey team for the event next month
North and South Korea are to form their first joint Olympic team and march together at the opening ceremony, Seoul says.
The two countries will field a joint women's ice hockey team for the Winter Olympics in PyeongChang, South Korea, next month.
They will also march under a unified peninsula flag, according to a statement from Seoul's Unification Ministry.
North Korea will also send a 550-member delegation to the games, which includes 230 cheerleaders, 140 artists and 30 Taekwondo players for a demonstration.
This delegation will begin arriving in South Korea on 25 January.
North and South Korea are still technically at war with each other, as the 1950-53 conflict ended in a truce, not peace.
The agreement over the Olympics is the result of rare talks between the two countries, which follow decades of frosty relations and heightened tensions regarding the North's missile tests, nuclear weapons programme and its regular threats to destroy its neighbours.
Despite the positive step regarding the Olympics, Japan has warned that the world should not be naive about the North's "charm offensive".
Foreign Minister Taro Kono said: "It is not the time to ease pressure or to reward North Korea.
"The fact that North Korea is engaging in dialogue could be interpreted as proof that the sanctions are working."
North and South Korean representatives have been talking with each other since last week, after more than two years of silence between the two sides.
They have already agreed that a 140-person orchestra from North Korea will perform in the South during the Olympics.
The reception in South Korea has been mixed, however, with some athletes not happy to find out they may have to play alongside strangers.
More than 100 petitions have been sent to South Korea's presidential Blue House website opposing a joint Olympics team.
The most popular has more than 11,000 votes, with one signatory writing: "This isn't the same as gluing a broken plate together".