China and Taiwan have agreed to establish representative offices in each other's territory, according to Taiwanese officials.
The agreement came as delegations from both sides met in Beijing for the first formal talks for almost a decade.
They are also hoping to finalise agreements on direct passenger flights and tourism.
Bilateral relations have warmed since the election in March of Taiwanese President Ma Ying-jeou.
He favours closer ties with China and, when he took office in May, said maintaining regional stability was his priority.
Shortly after that, Chinese President Hu Jintao met the head of Taiwan's governing Kuomintang party in Beijing, the most senior meeting between the two sides since they split at the end of a civil war in 1949.
Tentative deal
Delegations from the two sides are holding discussions in Beijing's Diaoyutai guesthouse until 14 June.
They are the first formal talks since dialogue was suspended in 1999, when Taiwan's leaders angered Beijing by leaning towards formal independence.
 | TAIWAN-CHINA RELATIONS Ruled by separate governments since end of Chinese civil war in 1949 China considers the island part of its territory China has offered a "one country, two systems" solution, like Hong Kong Most people in Taiwan support status quo  |
The talks appeared to bear their first fruit on Thursday morning, with a tentative agreement to establish offices in each other's territory, Taiwanese officials were quoted as saying.
Earlier, Taiwan's top delegate, Chiang Pin-kung, said the main items on the agenda were direct weekend charter flights and letting more mainland Chinese tourists come to Taiwan.
At the moment direct flights between the two sides are restricted to major holidays and numbers of Chinese tourists limited.
But economic problems - including inflation and a growing wealth gap - are high on the list of public grievances in Taiwan at the moment, and so local businesses are keen for the income a new influx of tourists would bring.
'Mutual trust'
Beijing also has good reason to encourage smiling handshakes and headlines about cross-straits friendliness, analysts say.
Two months before the Olympics, the Chinese government is very sensitive to international criticism, and Beijing's long-standing threat to use force against Taiwan, if it takes steps towards independence, continues to be an obvious focus for concern.
The two sides hope that the negotiations will pave the way for regular meetings, helping to improve cross-strait relations after decades of tensions and mistrust.
"As long as we have mutual trust and understanding... these talks are going to become an important communication mechanism for cross-strait development," said China's chief negotiator Chen Yunlin.
But while economic growth and a reduction in cross-straits tension will certainly be welcome, an agreement on core political principles - including re-affirmation of the One China principle - may be harder to reach.
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