North Korea says it has entered a "state of war" with South Korea and will deal with "all matters" accordingly.
"As of now, inter-Korea relations enter a state of war and all matters between the two Koreas will be handled according to wartime protocol," the North said in a statement broadcast by the official Korean Central News Agency.
"The long-standing situation of the Korean peninsula being neither at peace nor at war is finally over."
The statement also warned that any military provocation near the North-South land or sea border would result "in a full-scale conflict and a nuclear war".
The two Koreas have always technically remained at war because the 1950-53 Korean War ended with an armistice rather than a peace treaty.
Earlier this month, the North said it was ripping up the armistice and other bilateral peace pacts signed with the South in protest against South Korea-US joint military exercises.
South Korea's defence ministry said in a statement: "This is not really a new threat - just part of a series of provocative threats."
It added that "no particular troop movement" had been observed along the border.
The US said it was taking the new threat "seriously" but said it was following a familiar pattern. North Korea's leader Kim Jong-Un
"We've seen reports of a new and unconstructive statement from North Korea. We take these threats seriously and remain in close contact with our South Korean allies," said Caitlin Hayden, spokeswoman for the National Security Council.
Most analysts still believe this will remain a rhetorical rather than a physical battle, but the situation has now become so volatile that any slight miscalculation carries the potential for rapid escalation.
Sky's Asia Correspondent Mark Stone said: "It is more rhetoric by North Korea until they actually do something. Wars tend to begin with bangs not announcements on state news agencies, so this is Mr Kim pushing the rhetoric up another level.
"The problem is, he hasn't got any more levels to go to after this other than actual war - that is the big worry and the big unknown. Does his belligerence have a limit or not?
"The assumption, and hope, is that he will stop at the eleventh hour but what if he doesn't? That is why the Americans, the South Koreans, the Japanese and, more quietly, the Chinese too are all taking it very seriously."
Yesterday, both China and Russia asked for all sides to co-operate to prevent the situation worsening, with Russian Foreign Minister Sergei Lavrov voicing particular concern.
"We can simply see the situation getting out of control, it would spiral down into a vicious circle," Mr Lavrov told journalists.
His warning came after the North's leader Kim Jong-Un ordered missile units to prepare to strike US mainland and military bases, vowing to "settle accounts" after US stealth bombers flew over the South. The US has used B-2 bombers as a 'deterrence' measure in the region
US Defence Secretary Chuck Hagel stressed that Washington would not be cowed by Pyongyang's threats and stood ready to respond to "any eventuality".
The standoff has its roots in the North's successful long-range rocket launch in December and the third nuclear test it carried out in February.
Both events drew UN sanctions that incensed Pyongyang, which then switched the focus of its anger to the annual joint South Korea-US military drills.
As tensions escalated, Washington has maintained a notably assertive stance, publicising its use of nuclear-capable B-52s and B-2 stealth bombers.
The long-distance deployment of both sets of aircraft out of bases in Guam and the US mainland were intended as a clear signal of US commitment to defending the South against any act of aggression.
Edited by (>o.o)>, 29 March 2013 - 10:12 PM.