The trip by Kim Yo Jong is the latest move in an extraordinary show of Olympic diplomacy with Seoul that could prove to be a major challenge to the Trump administration's hard-line Korea policies.
As the opening ceremony began, she and South Korean President Moon Jae-in exchanged a historic handshake and spoke briefly. They smiled broadly, though it was not immediately known what they said.
She and Kim Yong Nam, the North's 90-year-old nominal head of state, were seated behind Moon and his wife, while Pence and his wife were seated beside the Moons and Japanese Prime Minister Shinzo Abe.
At the age of 30, Kim Yo Jong is quite possibly the most powerful woman in North Korea. Just a few years younger than her brother, she is believed to be his closest confidant and is a senior cadre in North Korea's ruling party.
Her arrival on Kim Jong Un's private jet with a coterie of 22 officials was broadcast live on South Korean television.
Looking confident and relaxed, she had a brief meeting at the airport with South Korean officials, including Unification Minister Cho Myoung-gyon, before being whisked away in a black limousine and catching the high-speed train to the mountains of Pyeongchang. As a sign of her status, the elder Kim Yong Nam offered her the seat of honor at the airport meeting, but she politely declined.
The trip comes amid a flurry of activity following Kim Jong Un's surprise proposal on New Year's Day to send a delegation of athletes, officials, entertainers and cheering groups to the Olympics.
His decision to dispatch his sister to the games is all the more significant since Kim Jong Un himself hasn't set foot outside North Korea or met a single head of state since he assumed power upon the death of their father, Kim Jong Il, in late 2011. His single-minded pursuit of a nuclear arsenal to counter what he sees as the threat of invasion by the United States has ratcheted up tensions not only with his rivals but also with primary trading partner China and with Russia, once a key benefactor.
The North's Olympic "detente" is a striking shift in tactics.
This is the first time a member of the Kim dynasty has traveled to South Korea, though their grandfather, Kim Il Sung, went to areas occupied by his troops south of what is now the Demilitarized Zone during the 1950-53 Korean War.
Kim Yo Jong has been rapidly rising within the North's power structure and is believed to be in charge of shaping her brother's public persona. But she has generally remained safely cloaked in her brother's shadow. This is her first high-profile international appearance at center stage, though she is technically just a member of a delegation headed by Kim Yong Nam.
Just before the opening ceremony, Kim Yong Nam attended a dinner for visiting foreign dignitaries hosted by Moon. Pence was also at the dinner and reportedly refused to shake the elderly North Korean's hand.
A White House official said Pence did not interact with Kim Yo Jong or Kim Yong Nam who were seated a row behind the U.S. vice president during the opening ceremony.
U.N. Secretary-General Antonio Guterres, who sat near Kim Yong Nam at the dinner, had a brief exchange with him and "reiterated his expectation and hope that all parties will use dialogue to achieve the denuclearization of the Korean Peninsula," U.N. deputy spokesman Farhan Haq said.
Guterres was also in "the same general area" as a number of other North Korean officials including Kim Yo Jong "but they were never in any personal contact with each other," Haq said.
For security reasons, few details of Kim Yo Jong's three-day itinerary have been made public.
After arriving at the South's ultramodern Incheon International Airport- the North's flagship airline is subject to sanctions - she traveled to Pyeongchang for the opening ceremony, where the North and South Korean athletes marched together behind a blue-and-white "unification" flag for the first time in more than a decade.
It was an emotionally charged moment.
The two Koreas, which remain technically at war, have cycled through countless periods of chill and thaw since their division 70 years ago. North Korea boycotted the 1988 Summer Olympics in Seoul and blew up a South Korean commercial airliner the year before. The past year has been particularly acrimonious as the North has accelerated its nuclear weapons development and test launches of missiles that are now believed to be able to reach most or all of the United States, South Korea's most important ally.
The delegation's most substantive event may come outside of the Olympic ambit on Saturday.
Along with the rest of the North's senior delegation, Kim Yo Jong was to have lunch with Moon at the presidential Blue House. The meeting could turn out to be just a lunch, a photo op or a nicety. But it is so unprecedented, and its announcement on Thursday was so sudden, that rumors are already swirling it could open the door to much more - perhaps even an offer for Moon to travel to Pyongyang, the North's capital.
The North and South held summits in Pyongyang in 2000 and 2007, both hosted by Kim Jong Il.
Considering the depth and complexity of the problems that keep the Koreas apart, it's highly unlikely a luncheon would lead to an immediate breakthrough on something like the North's nuclear weapons development. Pence, who is using his visit to South Korea to underscore the Trump administration's policy of maximum pressure on the North, has publicly and repeatedly warned Seoul not to let down its guard to a North Korean charm offensive.
But during her stay, Kim Yo Jong will have ample opportunity to play up the feel-good side of her country's participation in the games.
The first hockey match featuring the joint North-South women's ice hockey will be held Saturday night - they play Switzerland, where both Kim Jong Un and his sister went to school when they were children - and that would be an event she might want to see. The North has also sent a several hundred women-strong cheering squad, an orchestra with singers and dancers and a demonstration taekwondo team that will perform in Seoul and places near the Olympic venues.
Security for anything involving the North Koreans has been exceptionally tight.
The North's participation has been generally welcomed, but right-wing protesters have shown up at several venues to burn North Korean flags and tear up portraits of Kim's brother. The group is fringe, but their demonstrations have generated irate reactions in North Korea's state-run media and could potentially spin out into a major incident if they ever manage to get closer to the North Koreans themselves - or especially Kim and her entourage.
So far, police have kept the two at a safe distance.
Associated Press writers Kim Tong-hyung in Seoul, South Korea, and Edith M. Lederer at the United Nations contributed to this report. Talmadge is the AP's Pyongyang bureau chief. Follow him on Twitter and Instagram: @erictalmadge.
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