The encounter between Cyprus President Tassos Papadopoulos and Turkish Cypriot leader Mehmet Ali Talat on neutral ground in the UN-patrolled buffer zone is aimed at making progress toward ending 33 years of partition.
"I am looking forward to this meeting," Papadopoulos told the new ambassador of Iceland Guomundur Arni Stefansson after receiving his credentials Tuesday.
"I expect to discuss with the leader of the Turkish Cypriot community practical ways on how to achieve a breakthrough in the July 8 process, and expeditiously move forward with its implementation after a year of delays."
When they last met in July 2006, the two agreed a twin-track process to pave the way for peace talks in what the United Nations hailed as a "historic" breakthrough, but the so-called July 8 Agreement has been gathering dust ever since.
Diplomats say the fact the two will meet in the same room for only the second time since 2004 is significant.
"The absence of dialogue on Cyprus has been extremely damaging," a European diplomat said on condition of anonymity.
"The meeting has to be welcomed in the hope it will lead to real progress - it provides an opportunity to improve the climate.
"Proof of the goodwill on both sides will be in the outcome of the meeting. That's when the intention of the two leaders will be judged."
Talat - who has warned of the island's permanent partition - told Turkey's Anatolia news agency Sunday he hoped there would be a positive outcome from Wednesday's talks.
But he also warned there was "no question of giving way on the fundamental principles of political equality for the Turkish Cypriots, and Turkey continuing as a guarantor power on the island."
Papadopoulos heads the internationally-recognized government of Cyprus, while Talat is leader of the self-declared Turkish Republic of Northern Cyprus (TRNC), which is recognized only by Ankara.
Analysts were wary of raising expectations, and said the price of failure could set the peace process back indefinitely, as the world grows ever-weary of an issue seemingly resistant to resolution.
"The consequences of failure at the meeting or in the coming months will only impact on the two communities and the island, generally," said Tim Potier, assistant professor on international law and human rights at Cyprus's Intercollege.
"It's better for expectations to be lowered, and the front door left open for further discussions," he said.
Cyprus has been divided since Turkish troops invaded the northern third in 1974, following a Greek Cypriot coup backed by the military junta in Athens, aimed at uniting the eastern Mediterranean island with Greece.
And with little movement on the issue for more than three years, fears have been raised that permanent division is the only workable solution.
Talat said public opinion in the Turkish-occupied north had hardened since a 2004 referendum saw an overwhelming majority of Turkish Cypriots back a UN plan for reunification based on a loosely-tied federation, while it was rejected by Greek Cypriots.
"The division is deepening. There are opinion polls which indicate that the majority of Turkish Cypriots are in favor of the two-state solution: permanent partition," Talat told Britain's Daily Telegraph last month.
Greek Cypriots oppose a two-state solution.
A divided Cyprus joined the European Union in 2004, but its laws do not extend to the TRNC.
© 2007 Agence France-Presse