Relations between North and South Korea appeared to be improving when the two sides agreed to hold talks on the possible revival of attempts to reunite families separated during the Korean war.
But efforts to defuse bilateral tensions have ended in failure after the simultaneous collapse of talks between high-ranking military officials.
Colonels from both sides had met for a second day on Wednesday at Panmunjom, the "truce village" located along the heavily fortified border that has divided the peninsula since the end of the 1950-53 Korean war.
The talks, held amid pressure from China and the US to reopen dialogue, were supposed to have laid the ground for further discussions, possibly between the countries' defence ministers.
But Reuters quoted a unification ministry official in Seoul as saying that the talks had collapsed and that a date had not been set for the next meeting.
South Korean media reports that North Korea had refused Seoul's demand to apologise for the shelling of Yeonpyeong island in November, and for the sinking of the Cheonan, a South Korean navy ship, last March.
North Korea says it was not involved in the Cheonan sinking, and that it was provoked into attacking Yeonpyeong after the South fired artillery rounds into its waters during a drill.
Yet less than three months after the peninsula appeared to be on the brink of conflict, the countries' Red Cross agencies are due to discuss family reunions at a date yet to be agreed, reports said.
Hopes were also raised that the countries would broach joint tourism and industrial projects that have been affected by recent tensions.
The North, concerned about the effects of international sanctions and a near-halt to trade with its neighbour, has recently pushed for talks between the Red Cross agencies on the resumption of meetings between separated families.
"We conveyed our agreement to hold the Red Cross talks," said Lee Jong-joo, a spokeswoman for South Korea's unification ministry. "The government shared the view on the urgency and importance of humanitarian issues, including the reunions of separated families."
Hundreds of thousands of people were separated during the war. More than 20,000 elderly South Koreans have been briefly reunited with relatives from the North over the past 10 years, but many among the 80,000 others may die before they are given the chance to meet relatives they last saw six decades ago.
It is not clear whether Seoul has agreed to discuss the resumption of joint projects at Kaesong, an industrial complex north of the border, and Mount Kumgang, a tourism enterprise on the North's east coast.
Officials had been upbeat about the chances of a successful conclusion to the military talks. "The atmosphere of the meeting was good, and we are doing our best," South Korea's chief delegate, Colonel Moon Sang-kyun, told reporters.
Analysts expect the countries will have to meet several times before they agree on how to take the military dialogue to a higher level. Progress in bilateral talks could lead to a resumption of six-party nuclear negotiations involving the two Koreas, China, the US, Russia and Japan, which have not been held since April 2009.
:/ Not surprised. I have a lot of friends w/ family still in NK, but imo the NK govt doesn't really care about reunifying families; they're just stringing everybody along.
Can we get a 'Korea' tag?