The pair met for several hours on Desroches Island, a private beach paradise some 230 kilometres (140 miles) from Mahe, the Indian Ocean archipelago`s main island, alongside South African President Jacob Zuma, a key mediator in the talks.
The 15-nation Southern African Development Community, which is mediating in the talks, has set a July 31 deadline for the rivals to settle their differences, so a timetable for elections can be unveiled next week under a deal signed last year.
The Indian Ocean island of Madagascar has been mired in political crisis since Rajoelina ousted Ravalomanana in March 2009 with the army`s support.
Rajoelina, a former disc jockey who was only 34 when he seized power -- and who had to change the constitution to become eligible for the top job in future polls -- has failed to garner broad international backing.
Rajoelina and Ravalomanana last year signed a "roadmap" toward elections, but the deal has yet to be fully implemented.
The two men have already held talks among the country`s main political groups since the ouster of Ravalomanana by Rajoelina, a former mayor of the capital Antananarivo. But they have previously avoided a one-on-one meeting.
Their subordinates have inked several pacts but have yet to find a permanent solution to the three-year crisis engulfing Africa`s largest island.
One of the main stumbling blocks is to establish conditions for Ravalomanana`s eventual return from his exile in South Africa.
The roadmap signed in September provides for his return home without conditions, but he has twice tried and failed to return to Madagascar.
Moreover, parliament has passed a law which bars people with criminal records from running for office and demands that any presidential aspirants must have paid their taxes in full, effectively excluding Ravalomanana.
In 2010, Ravalomanana was sentenced in absentia to life in prison and hard labour for the murders of around 30 demonstrators, killed by his presidential guard in 2009 protests that led to his overthrow.
The Seychelles talks came three days after the army put down a mutiny at a military base near Madagascar`s main airport, leaving three dead.
It was unclear if the mutiny was tied to the political turmoil, as no demands were made, and on Wednesday the head of security for the capital Antananarivo said the soldiers had been paid to mutiny.
They each received $4.40-$6.60 (3.50-4.50 euros) to wage the mutiny on Sunday, General Richard Ravalomanana said, a decent payout in a nation where 81 percent of the population lives on less than $1.25 a day.
"A return to stability in Madagascar is crucial for all the countries in our southern and eastern Africa and Indian Ocean region," Seychelles President James Michel, who also attended the meeting, said in a speech Tuesday.
He warned that the island nation, where millions "are sinking into extreme poverty" could be facing a "social catastrophe".