* First high-level North-South talks in seven years
* North wants a halt to joint South Korean-U.S. drills
* Reunions of families separated since 1950s to be held soon (Adds details, analyst)
By Ju-min Park
SEOUL, Feb 11 (Reuters) - Senior officials from North and South Korea will hold a rare meeting on Wednesday, the South announced, with discussions likely to focus on reunions of separated families and the South's annual joint military drills with the United States.
The meeting, announced on Tuesday by Kim Eui-do, spokesman for the Unification Ministry, was arranged with unusual speed after the North proposed the talks in a message on Saturday.
It will be the highest level contact since 2007, when the two Koreas, separate since the end of World War Two, held only their second summit meeting. They are also the first such talks since the North shelled a South Korean island in 2010 that sharply raised tensions.
North Korea is likely to restate its demand for the cancellation of the joint drills, as it has done at various venues in the past few weeks, said Yang Moo-jin of the University of North Korean Studies in Seoul.
"They will try to explain the position that family reunions and military activities are not compatible," Yang said.
The drills, due to start later this month, are a longstanding source of irritation for the North, which denounces them as a rehearsal for a U.S. invasion.
The two sides have agreed to hold reunions this month of family members separated since the 1950-53 Korean War at the Mount Kumgang resort, just inside North Korea.
The meetings are seen as a rare confidence building move, but North Korea has threatened to cancel the event, citing a sortie last week by a nuclear-capable U.S. B-52 bomber.
President Park Geun-hye's deputy national security adviser will lead the South's delegation of defence and security officials at Wednesday's talks at the Panmunjom "truce village" on the heavily guarded border, ministry spokesman Kim said.
The North's delegation will be headed by Won Tong Yon, a senior official at the ruling Workers' Party of Korea's United Front Department that handles affairs with the South.
The two Koreas remain technically at war as the Korean war ended with an armistice signed at Panmumjom, rather than a peace treaty.
TALKS SCRAPPED LAST YEAR
Last year, high-level talks were scrapped less than a day before their planned start as the two sides failed to agree on who should attend.
Tension remained high for months on the peninsula last year, with the North threatening to attack South Korea and the United States after the United Nations imposed tougher sanctions for Pyongyang's latest nuclear test.
North Korea has cancelled an invitation for a senior U.S. official to visit Pyongyang to seek the release of imprisoned U.S. missionary Kenneth Bae. But it has showed apparent interest in reconciliation with the South in recent months.
It was unclear whether the withdrawal of the invitation was a result of the decision announced on Monday that the United States and South Korea were proceeding with the drills.
China, North Korea's sole diplomatic ally, expressed concern at the "recent reaction of relevant parties" over the drills and suggested they would not be a welcome factor in upholding peace.
"It conforms to the common interests of all concerned parties to preserve peace and stability on the Korean peninsula and in the Northeast Asian region, which is also a shared responsibility," Foreigh Ministry spokeswoman Hua Chunying told a daily news briefing. (Additional reporting by Ben Blanchard in Beijing; Editing by Jack Kim and Ron Popeski)