Wariness, however, still lingers in Seoul and Washington over Pyongyang's springtime provocations, which included warnings of nuclear strikes against the allies, and the North's repeated vows to push ahead with nuclear weapons and missile work.
Seoul's Unification Ministry, which handles inter-Korean affairs, said operations at the industrial park, located just north of the heavily armed border separating the two Koreas, would resume sometime after a trial run that starts Monday. The Koreas also plan reunions this month of families divided by the Korean War, and last week restored a military communications channel at the border.
Wednesday's agreement follows through on a development last month, when, after seven rounds of talks, one of which ended in a scuffle, the Koreas agreed that they would work toward opening the factory park. The complex in North Korea's third-largest city, Kaesong, was the last remaining symbol of inter-Korean co-operation until Pyongyang pulled its 53,000 workers.
Unification Ministry officials said in a statement that South Korean companies operating at Kaesong would be exempt from paying taxes imposed for operations this year.
North Korea's state media later confirmed the restart of work at Kaesong.
The industrial park combined South Korean initiative, capital and technology with cheap North Korean labour. It was also a rare source of hard currency for North Korea, though the impoverished country chafed at suggestions that it needed the money Kaesong generated.
While tensions are now easing, North Korea, citing a routine military drill between the U.S. and South Korea, along with U.N. sanctions over its February nuclear test, unleashed a weekslong outburst of threatening rhetoric in March and April.
The decade-old industrial park had survived previous periods of tension, including attacks blamed on Pyongyang that killed 50 South Koreans in 2010, and the shutdown of other big co-operation projects.
By the end of 2012, South Korean companies had produced a total $2 billion worth of goods during the previous eight years.
North Korea is estimated to have received $80 million in workers' salaries in 2012, an average of $127 a month per person, paid in U.S. dollars, according to the Unification Ministry in Seoul.