Government and rebel negotiating teams are at a luxury hotel in neighbouring Ethiopia's capital Addis Ababa, with the rivals first meeting special envoys from regional nations.
But fighting is continuing in South Sudan, with the army vowing to retake the town of Bor from rebel forces for a second time.
The ongoing battles prompted the top UN aid official in South Sudan, Toby Lanzer, to warn that soldiers and rebels must protect civilians and aid workers, or risk worsening a situation he described as "critical".
Ethiopia's foreign ministry confirmed that negotiations had started, adding that the regional East African bloc IGAD that is helping to broker a deal "was committed to support in any way possible".
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Sources suggested the rivals may not meet directly until at least Saturday.
"We are participating in talks because we want peace for our people even though the rebel groups have not accepted a cessation of hostilities," the South Sudan government said in a statement yesterday.
Fighting erupted on December 15 when Kiir accused Machar of attempting a coup in the oil-rich but impoverished nation.
Machar has denied this, in turn accusing the president of conducting a violent purge of his opponents and refusing to hold direct talks with Kiir.
Fighting has spread across the country, with the rebels seizing several areas in the oil-rich north. Aid workers have increased warnings of a worsening crisis for civilians affected by the conflict in the landlocked country of almost 11 million people.
"We call on all parties to facilitate aid agencies' access to civilians, and to protect and respect humanitarian activities," Lanzer said.