Many are pinching themselves to be sure it's real.
After three decades of separation by a concrete and barbed-wire barrier, Greek and Turkish Cypriots are suddenly mingling again and rushing to see their old homes and places of worship on the other side of the divide.
The scenes of reconciliation have encouraged hopes for an end to the divisions on Cyprus, which have been a major source of friction between NATO members Greece and Turkey. "This is now in the hands of the people," said Lellos Demetriades, the former mayor of Nicosia, the capital. "The politicians will follow."
Paschalis Nicolaou was among the first Greek Cypriots to cross the ceasefire line after a surprise decision two weeks ago by the self-styled Turkish Cypriot state to allow short visits. "The Turkish Cypriots were so friendly. We were driving through little villages and people came out of their homes to ask [us] to join them for coffee," says Mr. Nicolaou, a customs officer. More than a quarter of the island's 750,000 population have since made the trip across the UN-manned buffer zone.
"I'm indescribably happy," says Turkish Cypriot Mustafa Kasap, standing in Eleftheria (Freedom) Square, in southern Nicosia. "I know these streets so well. I have been watching and missing them from afar for 29 years."
The strategically located island has been effectively partitioned, dividing its ethnic Greek and Turkish Cypriot communities, since 1974. That was when Turkish troops invaded the north after a short-lived coup in Nicosia, inspired by the military junta then ruling Greece.
The UN, backed by US and European diplomatic muscle, has repeatedly tried to reunify the island. The latest, most concerted effort collapsed in March, a month before Cyprus, represented internationally by the Greek Cypriots, signed a treaty with the EU to join the bloc in May 2004. The UN blamed the failure on the Turkish Cypriot leader, Rauf Denktash, a veteran hardliner.
Diplomats suspect Mr. Denktash has now eased the travel restrictions in response to coaxing from mainland Turkey. If Cyprus is not reunited before the Greek Cypriots join the EU next year, Ankara's own bid for EU membership will be in peril. Denktash was also feeling heat from his impoverished and isolated people, many of whom have taken to the streets in recent months in unprecedented protests against his failure to secure a settlement. A peace deal would have allowed Turkish Cypriots to share the benefits of EU accession with the wealthier Greek side.
The EU and Greek Cypriot authorities have welcomed the Turkish Cypriot gesture on freer movement but insist it does not substitute for a peace deal. Difficult negotiations on territorial adjustments, power sharing, and property issues lie ahead.
"This is a very welcome start, and is giving the two communities the chance to get to know each other after 30 years," says James Ker-Lindsay, executive director of Civilitas Research, a Nicosia-based think tank. "But it by no means represents the start of a comprehensive political process towards a settlement. It's a very important part in peacebuilding, but it's no substitute for diplomatic negotiations."
George Iacovou, Cyprus's foreign minister, said Monday that the eased Turkish Cypriot restrictions on movement have not persuaded the UN to re-engage in settlement talks. "The UN secretary general [Kofi Annan] is not ready," Mr. Iacovou said. "What he wants first is for Turkey to change its stance and for Mr. Denktash to do the same." Dr. Ker-Lindsay agrees that Mr. Annan may be reluctant to rush back in: "He'll want to see where this is going before he invests valuable time on Cyprus again."
Diplomats in Nicosia are looking for signals from Turkey. Some Turkish Cypriot newspapers speculate that when Turkish Prime Minister Recep Tayyip Erdogan visits northern Cyprus later this week, he may announce the withdrawal of some of Turkey's 35,000 troops stationed on Cyprus.
Meanwhile, Greek Cypriot authorities have announced goodwill measures to improve living standards among Turkish Cypriots. The package will help Turkish Cypriots work and trade in southern Cyprus and gain access to healthcare and other state benefits.
Denktash, however, has cautioned that the "honeymoon season" may not last, because "the political reasons for conflict still exist."
Still, many here are confident that the new grass-roots contact between the two communities will increase chances for a solution. "We're still not there in terms of the political solution, but nothing like this has happened since 1974," says Nicos Anastasiou, a high school teacher. "The 'Berlin Wall' of Cyprus is now full of cracks and holes. Thirty years of prejudices and stereotypes have collapsed in days, along with the myth that there was no trust between the communities."
Touching stories emerge daily in the local media. A Greek Cypriot couple returned to the house they fled as Turkish tanks rolled up 29 years ago - and found their wedding photos still hanging on the wall. A woman went to thank a Turkish Cypriot who had saved her family in 1974 - only to learn from his mother that the then-teenager had been killed in action a few days later. Even as huge numbers of people have crossed the divide, there have been only two reports of inhospitable exchanges.