South Korean pop stars visited Pyongyang to perform and North Korean dictator Kim Jong Un was seen at the event.
Members of Red Velvet, one of South Korea's top K-pop groups, sang their hits "Bad Boy" and "Red Flavor".
"We should hold culture and art performances frequently", Kim told South Korean performers.
"(Kim) expressed thanks to them for coming here with (a) good performance, prepared by them with sincerity in a short span of time", the KCNA report said.
Also in attendance were Choe Hwi, chairman of the North's National Sports Guidance Committee, Ri Son-gwon, chairman of the Committee for the Peaceful Reunification of the Fatherland and North Korea's Culture Minister Pak Chun-nam. President George W. Bush had labeled it a member of the "axis of evil" in 2002.
The most recent event was Kim's visit this week to China, on the invitation of president Xi Jinping.
The trip was Kim's first foreign visit after resuming office in 2011.
Those in the audience sang "Let's meet again" and "Our wish is unification", a song about reunification of the two Koreas, together with the South Korean performers at the concert's finale.
Kim also talked about girl band Red Velvet.
Even leader Kim acknowledged that there had been "so much interest in whether I'd come to see Red Velvet or not". "Originally, I planned to come the day after tomorrow but I adjusted my schedule and came today".
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Red Velvet is being joined in Pyongyang by South Korean singer Baek Ji Young and rock band YB, according to the Unification Ministry.
South Korean pop singers performed in the North during a past era of detente, but it was the first time a North Korean leader had attended a South Korean performance in the North's capital.
Despite the rapprochement, annual joint US-South Korea military drills, codenamed Foal Eagle, kicked off on Sunday.
Whether Pyongyang authorities would make any demands was a matter of debate in South Korea's media because the general public in North Korea is strictly banned from listening to K-pop. One of the band members, Eric Mun, told reporters that they looked at the singers "with eyes like shooting lasers", according to Yonhap.
What followed was a group performance from the 11 acts of Cho's song Dear Friend and the two songs that wrapped up the North Korean artists' Seoul concert in February.
The 2,300 North Koreans in the arena clapped in unison to the performance by the South Korean team, which was carried out to the tunes of electronic dance moves.
When South Korean boy band Shinhwa performed in North Korea in 2003 as part of a similar cultural diplomacy venture, the audience-dressed in suits and traditional dresses-greeted them with silence and stony stares.
In February, North Korean athletes and entertainers, along with a retinue of political figures, attended the 2018 Winter Olympics, hosted by South Korea, after which a senior delegation from Seoul traveled north for meetings with Kim.
South Korean singer Cho Yong Pil (centre) and other South Korean performers rehearse ahead of a performance by a South Korean art troupe in Pyongyang. Add South Korea as an interest to stay up to date on the latest South Korea news, video, and analysis from ABC News.