Michael Douglas and Catherine Zeta-Jones seem well on their way to reconciliation.

The pair, who separated in August but are rumored to be working things out, dined at NYY Steak recently with a business associate.

Holding hands, the couple looked "really happy," a witness told us. A "very smiley" Douglas, 69, also introduced Zeta-Jones, 44, as his wife, said the spy.

The trio, who went into the eatery through a side entrance, dined on dry-aged steaks and seafood in a private room.