The leaders of India and Pakistan promised to work together to "restore normalcy and cooperation" between their countries and seek peace in the disputed Himalayan territory of Kashmir.
Indian Prime Minister Manmohan Singh and Pakistani President General Pervez Musharraf, meeting Friday for the first time since Singh took power in May, also discussed the possibility of running a natural gas pipeline between their nations.
Dialogue between the nuclear-armed rivals started in January when Musharraf met with Singh's predecessor, Atal Bihari Vajpayee.
"I sincerely believe that today is an historic day. We have made a new beginning," Singh said after Friday's meeting, which was held on the sidelines of the UN General Assembly session.
He expressed confidence that "despite the difficulties on the way," he and Musharraf would "succeed in writing a new chapter in the history of our people."
In a joint statement, the leaders reiterated their commitment to continued bilateral talks and to implementing confidence-building measures.
Musharraf and Singh also agreed that "possible options for a peaceful, negotiated settlement" of their dispute over the divided territory of Kashmir "should be explored in a sincere spirit and purposeful manner."
Since gaining independence from Britain in 1947, India and Pakistan have fought three wars -- two over Kashmir, which is divided by a 1972 cease-fire line called the Line of Control.
India's portion, Jammu-Kashmir, has been wracked since 1989 by an insurrection by Islamic separatists seeking independence or union with Pakistan.
Javed Ahmed Mir, chief of the pro-independence Jammu-Kashmir Liberation Forum, demanded inclusion of Kashmiri representatives in peace talks.
"We have always been saying that the Kashmir problem can't be resolved bilaterally by India and Pakistan. We hope that future negotiations will pave the way for inclusion of Kashmiris in the dialogue process," Mir told The Associated Press from Kashmir.
Musharraf and Singh shook hands before going into an hourlong one-on-one meeting, followed by a session with their full delegations.
Musharraf presented Singh with a painting of a village near Islamabad where the Indian leader was born, as well as a photo of the village and a copy of one of Singh's school report cards.
India's former high commissioner to Pakistan, G. Parthasarthy, said the friendly tone of the meeting was a positive sign.
"The meeting took place after an atmosphere has been created in which rhetoric and strong words were avoided in speeches at the UN," Parthasarthy said. "This has developed a climate to seek avenues to expand cooperation and confidence."
Relations between the sides have improved in recent months over the Kashmir dispute.
They have reopened bus, train and air links severed two years ago, and have made it easier for people to cross their shared border. But both sides agree they need to do more to boost exchanges between their people, who have strong cultural ties.
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