The reunion, a highly emotion-charged issue because the separated family members are elderly, will take place in Mount Kumgang, a scenic resort on North Korea's east coast, and the families will have six days starting Feb. 20 to celebrate the occasion, said an agreement between representatives of the two Koreas, who met on the North Korean side of the truce village of Panmunjom.
The families living on both sides of the border last met in October 2010.
The reunion agreement is seen as a critical first step toward patching up the strained relations between the South and the isolated communist North.
Pak Yong Il, North Korea's chief delegate to the talks, said the Red Cross family reunion "is a very important starting point for improving North-South relations," South Korea's Yonhap News reported.
Yonhap said Pak's comment was relayed through an audio file released by the South Korean Unification Ministry, which handles inter-Korean issues.
The reunion will take place when South Korea will also be getting ready for its annual joint military exercises with the United States, starting in late February and lasting through April, Yonhap said.
North Korea, under its unpredictable leader Kim Jong Un, has strongly opposed the military exercises and wants the South to cancel them, maintaining they are a rehearsal for an attack against it, Yonhap said.
The South has refused to cancel the exercises, saying they are routine and defensive in nature. Currently, about 28,500 U.S. troops are stationed in South Korea, a legacy of the Korean War.
Tensions between the two Koreas have heightened as the North provoked ire with long-range missile firings and nuclear tests, the third of which was conducted a year ago in violation of U.N. sanctions. The six-nation talks on North Korea's denuclearization also have been stalled for more than four years.
The South, while welcoming the move for family reunions, was wary of any so-called charm offensive by the North, fearing such actions could lead to fresh provocations.
South Korea said Wednesday it can discuss other issues with North Korea if the family reunions go well, Yonhap said.