US Secretary of State John Kerry and Cuban Foreign Minister Bruno Rodriguez have held talks, in the highest level meeting between the two countries in more than half a century.
The two held closed-door discussions after arriving in Panama for a summit.
Meanwhile, the US state department has reportedly recommended that Cuba be removed from its list of states said to sponsor terrorism.
Such a move could pave the way for the two countries re-opening embassies.
US President Barack Obama and Cuban leader Raul Castro are also due to meet on the sidelines of the Summit of the Americas in Panama over the coming days.
“Secretary Kerry and Cuban Foreign Minister Rodriguez had a lengthy in the evening. The two agreed they made progress and that they would continue to work to resolve outstanding issues,” a senior US official said.
The last comparable high-level meeting was in 1959, when Fidel Castro met then Vice-President Richard Nixon.
Diplomatic ties froze two years later, but last year Mr Obama announced that a “new chapter” in relations would commence.
At the same time, Mr Obama ordered a review of Cuba’s status which he now confirms has finished its work.
1960: US breaks off diplomatic relations and imposes trade embargo
1961: US backs failed Bay of Pigs invasion; Fidel Castro proclaims Cuba a communist state and begins to ally with USSR
1962: Fearing US invasion, Castro allows USSR to deploy nuclear missiles in Cuba. Crisis takes the two superpowers to brink of nuclear war
1980: Around 125,000 Cubans, many of them released convicts, flee to the US when Castro temporarily lifts restrictions
1993: US tightens embargo, which introduces some market reforms amid economic woe following collapse of the Soviet Union
1999: Cuban child Elian Gonzalez picked up in refugee boat off Florida coast and placed with relatives in Florida, against wishes of father in Cuba. After numerous court decisions, US federal agents seize him to return to father
2002: US Under-Secretary of State John Bolton adds Cuba to “axis of evil”
2014: President Obama announces moves to normalise diplomatic and economic ties in a “new chapter” of US-Cuba relations