North Korea's Kim Jong Il made the proposal as he resumed talks with South Korean President Roh Moo-hyun after a lunch recess earlier Wednesday, fueling hopes for progress in the peace process between the two Koreas, technically at war since the 1950-1953 conflict.
After consulting officials accompanying him on his historic visit to the reclusive Communist state, Roh Moo-hyun chose not to except the offer and to return to Seoul on Thursday as planned, the agency said. The last visit to the North by a South Korean leader was undertaken by the then president, Kim Dae-jung, seven years ago.
Analysts have been skeptical about the summit, saying it is unlikely to produce a formal peace treaty between the North and the South, as this requires the participation of the United States and China, which were also involved in the Korean War.
The leaders may adopt a joint statement in the form of a "peace declaration" on Thursday, Yonhap reported, citing officials accompanying the South Korean president.
At the summit, which began on Tuesday when Roh Moo-hyun traveled to the North by car and symbolically walked across the demarcation line, the leaders are also expected to discuss unification and trust-building measures, the resumption of railroad links and economic ties.
Media reports said Seoul would offer Pyongyang substantial aid in rebuilding seaports, as well as a wide range of investment projects.