The North is under a set of multilayered global sanctions due to its provocations, with U.S. President Donald Trump showing no signs of letting up on a "maximum pressure' campaign to press the North to give up its nuclear arsenal".
North Korea has sent a delegation of 22 athletes to compete in five disciplines, with their women's ice hockey players to compete in a unified Korean team.
They met and lunched with South Korean President Moon Jae-in on the second day at the presidential complex.
South Korean President Moon Jae-in has been using the Games in his efforts to break the ice with the North and pave the way for talks over the North's weapons program.
Moon did not immediately accept the invitation and has said he hopes the "right conditions" will be created so it can go ahead.
Rather than tweeting, threatening, and provoking North Korea, President Trump should instead take advantage of this rare opportunity to communicate peacefully and diplomatically with government officials in the North in order to finally make progress in this delicate world issue.
Tensions between the two soared previous year as Pyongyang launched intercontinental ballistic missiles capable of reaching the United States mainland and carried out by far its most powerful nuclear test to date.
She is viewed as Kim Jong-un's trusted sibling, having been born to late leader Kim Jong-il and Ko Yong-hui, a Korean resident of Japan, who died in 2004.
The Trump administration is wary of engagement with the North, which has been subjected to increasingly tough worldwide sanctions, unless it shows clear signs of giving up its nuclear weapons program.
Moon would like to bring both North Korea and the United States to the negotiating table.
The senior diplomatic source said Pence "degraded the image of the United States as a superpower" by meeting with North Korean defectors along with Otto Warmbier's father, and by speaking strongly against North Korea on multiple occasions.
The US may be open to diplomatic engagement with North Korea without preconditions, as a recent understanding was reportedly reached between Washington and South Korean officials last week.
The United States insisted it would continue its policy of exerting worldwide pressure on North Korea in an effort to get it to abandon its nuclear program.
The prospect of two-way talks between the Koreas, however, may not be welcomed by the United States.
The two sides stressed on Saturday that they were interested in maintaining movement toward peace.
Civilian contact is strictly banned between the two Koreas, which have been divided since the 1950-53 Korean War ended with an armistice instead of a peace treaty.
A White House official said that although Moon did not discuss the invitation with Pence last Saturday, the South Korean President made it very clear that only when North Korea actually starts to take steps to denuclearize would anyone even consider beginning to take the pressure off.