South Korea confirmed it had received a call from the North at 15:30 local time (06:30 GMT) on Wednesday.
The North Korean leader had earlier said he was open to dialogue with Seoul and to sending a team to the Winter Olympics in the South next month.
The two nations have not held high-level talks since December 2015.
North Korea cut off the communications channel shortly afterwards, refusing to answer calls, according to officials in the South.
A North Korean official announced the hotline’s reopening in a televised statement.
He said the two nations would discuss the practical issues around a proposal to send a North Korean delegation to the Winter Games in Pyeongchang in February.
“We will make close contact with South Korea in a sincere and faithful manner,” Yonhap news agency quoted the official as saying.
The press secretary for South Korea’s President Moon Jae-in said the restoration of this communications channel was “very significant”.
“It creates an environment where communication will be possible at all times,” he said.
According to the South Korean Unification Ministry, there are a total of 33 direct lines that North and South Korea once used to communicate with each other.
This particular phone line, established in 1971, is based in Panmunjom.
The border village, in the heavily guarded demilitarised zone (DMZ), is where the Koreas have historically held talks.
In a New Year’s Day Speech, Mr Kim spoke of lowering tensions and of melting “frozen North-South relations”.
He said attending the Games would be “a good opportunity to show unity of the people” in North Korea.
South Korea had already indicated that the North’s participation in the Games would be welcomed.
Seoul offered high-level talks in response, with President Moon Jae-in calling it a “groundbreaking chance” to improve relations.
It is not yet clear whether North Korea will accept that offer, but the opening of the hotline will allow for preliminary discussions to be held.
North Korea cut off communications on the hotline in 2016, following a row over the Kaesong industrial complex.
The complex was joint economic venture between the two Koreas, but the South suspended the project it in response to a nuclear weapons test by the North.
North Korea has come under increasing international pressure in the past year over its nuclear weapons programme.
President Moon said the North’s continuing tests would be the backdrop to any new discussions about the Olympics.
The initial call was brief as checks are still being carried out on the line, according to South Korean officials.
At the same time as offering an apparent olive branch to the South, Mr Kim used his speech to repeat threats against the US, saying a nuclear launch button was always on his table.
US state department spokesman Heather Nauert said that Mr Kim’s latest move “may be trying to drive a wedge of some sort between the two nations – between our nation and the Republic of Korea [South Korea]”.
The South says it has discussed its latest steps with the US.
Meanwhile, Mr Trump remains outspoken in his tweets. On Tuesday night, the US President boasted that his nuclear button was “much bigger” and “more powerful” than the North Korean leader’s.