Telangana Chief Minister K. Chandrashekhar Rao and his Andhra Pradesh counterpart Y.S. Jagan Mohan Reddy held the talks at Pragati Bhavan, the official residence of the former.
Though Chandrashekhar Rao and Jagan Reddy met several times since the latter formed the government in Andhra Pradesh a month ago, this is the first full-fledged talks between them to sort out inter-state issues.
Both the leaders have already agreed to solve all the outstanding issues amicably and foster good neighbourly relations for the welfare of the people of both the states.
Sharing of water from Krishna and Godavari rivers is expected to be the main item on the agenda of the high-level talks. They are likely to discuss the dispute over sharing of Krishna water and the possibility of diverting the Godavari waters to Krishna basin.
The issues arising out of bifurcation of Andhra Pradesh have remained unresolved for last five years due to differences between Chandrashekhar Rao and his then counterpart N. Chandrababu Naidu.
Dispute over dues of power utilities, distribution of employees and assets of electricity department will also feature in the talks.
Officials said the two leaders might also discuss distribution of assets of institutions listed in Scheduled IX and X of Andhra Pradesh Reorganization Act, 2014. The issue of distribution of Andhra Pradesh Bhavan in New Delhi is also likely to come up.