Reese Witherspoon and Jake Gyllenhaal are having sex. That’s reading between the lines of this PEOPLE report.

Five months after announcing her split from husband Ryan Phillippe, Reese Witherspoon seems to be wading back into the dating pool — with Jake Gyllenhaal, her costar in the upcoming CIA thriller Rendition.

Although the two have been careful to avoid the spotlight, they were spotted March 23 dining with two other couples at L.A.’s Il Sole. “They were cuddling,” an observer tells PEOPLE in its new issue. “It looked very playful.”

And now friends of both say the relationship extends beyond the occasional dinner. “In the last month, they’ve been spending a lot more time together,” says a source close to Gyllenhaal, adding that the actor has even met up with Witherspoon, 31, and her kids — daughter Ava, 7, and son Deacon, 3 — in New York City. At 26, he is five years her junior, but “Jake really likes her and isn’t at all concerned that she has two kids.”

Jake still has to prove that he’s not gay after making out with Heath Ledger in “Brokeback Mountain.” This is a very good start.