The common acknowledgement came as External Affairs Minister SM Krishna met his Pakistani counterpart Hina Rabbani Khar, a day before the meeting of the prime ministers of the two countries on the sidelines of the SAARC summit.
During the meeting, both leaders discussed issues of bilateral interests and agreed that terrorism was a threat to both countries.
"Krishna and Pakistan Foreign Minister met. Both leaders termed terrorism a threat to both countries and acknowledged that trust deficit between the two countries is shrinking," official sources told PTI.
Earlier, Krishna had sent out positive signals before the meeting, telling reporters accompanying him to Maldives that the environment was very positive and that the trust level has gone up between the two countries.
Prime Minister Manmohan Singh and his Pakistani counterpart Yousuf Raza Gilani will meet tomorrow ahead of the inauguration of the eight nation summit and are expected to review the progress in bilateral relations.
Positive signs have been witnessed in bilateral ties lately, including Pakistan's decision to grant the Most Favoured Nation trade status to India.