Salva Kiir and Riek Machar met at the Casa Santa Marta within the Vatican's walls, a residence for visitors and home to Pope Francis.
Kiir and Machar last saw each other in October last year, shortly after the signing of a power-sharing deal.
The meeting will end Thursday with a speech by Pope Francis at 5pm (1500 GMT), followed by a dinner.
South Sudan's warring rivals President Salva Kiir and rebel leader and former vice president Riek Machar began a retreat at the Vatican Wednesday aimed at finding a path to peace.
The arch-rivals met at the Casa Santa Marta within the Vatican's walls, a residence for visitors and home to Pope Francis, who chose it over the traditional papal palace on his election in 2013.
The unimposing hotel was the scene of historic peace talks between Israeli President Shimon Peres and Palestinian President Mahmoud Abbas in 2014.
Kiir and Machar last saw each other in October last year, shortly after the signing of a power-sharing deal, when Machar made a brief return to Juba for the first time since fleeing on foot in a hail of gunfire in July 2016.
Machar was Kiir's vice president until a falling out in 2013 which kickstarted a civil war just two years after independence from Sudan.
Battles between those from Machar's Nuer community and Kiir's Dinka people were characterised by brutal violence, rape and UN warnings about "ethnic cleansing".
Kiir met with Italian Prime Minister Giuseppe Conte earlier Wednesday before heading to the Vatican, where he was set to meet with members of a unity government which is meant to be in place in May.
The Vatican confirmed the arrival of Machar, who under the new deal will be reinstated as vice-president.
The other vice-presidents expected at the retreat are James Wani Igga, Taban Deng Gai and Rebecca Nyandeng De Mabior.
Ecclesiastical authorities will be represented by the eight members of the South Sudan Council of Churches.
The meeting will end Thursday with a speech by Pope Francis at 5pm (1500 GMT), followed by a dinner.