"I'm sure that this will be a very emotional moment not only for all Koreans but also for the entire world", Bach said.
The unified women's ice hockey team will be represented by the Korean Unification Flag and compete as Korea, with the anthem being the song "Arirang". At least three must be North Korean, the International Olympic Committee said.
The Samjiyon art troupe, which comprises orchestra members, singers and dancers, is part of North Korea's Olympic delegation that also includes athletes, officials, journalists and a taekwondo demonstration team.
The North Korean athletes will be handed quota places, a rarely-used form of wild card, to allow them to compete in ice skating, skiing and ice hockey.
Kim Jong-un had initiated his reunification efforts by reactivating the hotline with Seoul after two years and announcing his country's willingness to participate in the #2018 Winter Olympics.
At a press briefing on Monday, Moon asked South Koreans to give the inter-Korean collaboration a chance.
International Olympic Committee chief Thomas Bach told reporters in Lausanne that the 22 athletes will participate in figure skating, short-track speed skating, cross-country skiing and Alpine skiing, in addition to the joint ice-hockey team.
"The Olympic spirit is about respect, dialogue and understanding", Bach added following the announcement in Lausanne.
Talks under way to finalize North Korea participation in Winter Olympics
But its presence in Pyeongchang - 80km south of the demilitarised zone that divides the Koreas - is a significant diplomatic coup. She is in charge of the North's artistic performances during the Winter Olympic Games, and is in Seoul to inspect musical venues.
Seoul and organisers hope that the Games, which they have promoted as "Peace Olympics", could ease tensions on the peninsula that surged to new heights in recent months over the North's nuclear stand-off with the US.
North Korea had zero athletes in 2014 and two in 2010. North Korea earlier suspended a planned visit to the South by its delegation, tasked with preparing cultural performances for the Games next month, without giving a reason.
Murray said the only criteria she has to decide who plays is what is best for the team.
"We're very excited about this", said Yang Yang, one of China's representatives to the IOC.
Three North Koreans will compete in the cross-country skiing and another three in the Alpine skiing slalom and giant slalom events.
The 2018 Winter Olympics is being held in the mountainous resort town of Pyeongchang, 80km from the heavily-fortified inter-Korean border, and kicks off with the opening ceremony on Feb 9.
Pyongyang notified the neighboring country about that decision without offering any explanation, the South Korean Unification Ministry confirmed. Photos showed a smiling Hyon shaking heads with a South Korean official upon arrival at the border. It will also take part in the Paralympics in March for which it will send across a separate delegation of supporters, athletes, journalists.