Indian foreign secretary Shyam Saran at the end of two days of talks in the Indian capital with his Pakistani counterpart Riaz Mohammed Khan said that the possibility of creating a "disengagement zone" in Kashmir had been broached.
Indian Prime Minister Manmohan Singh, during a meeting with Pakistan's Foreign Secretary Riaz Mohammad Khan, said he wanted "permanent peace with Pakistan" and accepted in principle an invitation to visit Pakistan.
"Such a disengagement zone would have to acknowledge the positions which are currently there, and from where there would be redeployment (of troops) taking place," he told the Press Trust of India news agency.
"We are trying to work out modalities on how this would be actually translated into an agreement."
Khan, meanwhile, told reporters that Islamabad had asked India to allow "self-governance" in Kashmir and urged a cutback of troops in the heavily militarised region.
"There is a commitment by both sides to reach a final settlement" (on Kashmir) and "in the search for it, various ideas, any ideas need to be discussed," he said.
In November, India and Pakistan agreed to open five meeting points on the Line of Control (LoC) after the October 8 South Asian earthquake which claimed some 75,000 lives in the region.
The officials also reached consensus on starting a bus service between Poonch in occupied Kashmir and Rawalakot in Azad Kashmir before April.
A bus service between occupied Srinagar and Muzaffarabad began last April after almost 60 years in what was seen as the first tangible fruits of the peace process.
A truck service on Muzaffarabad-Srinagar route for trade in permitted goods would be in place as soon as the infrastructure damaged during the earthquake is restored, the statement said.