South Korea has promised unspecified "grave measures" if Pyongyang rejects talks on a jointly-run factory park shuttered for nearly a month.
The park in the North Korean border town of Kaesong is the most significant casualty so far in the recent deterioration of relations between North and South Koreas.
North Korea barred South Korean managers and cargo from entering North Korea earlier this month, then recalled the 53,000 North Koreans who worked on the assembly lines.
South Korea's Unification Ministry proposed working-level talks on Kaesong and urged the North to respond by noon Friday, warning that it will take "grave measures" if North Korea rejects the call for dialogue.
In a televised news conference, spokesman Kim Hyung-suk refused to say what those measures might be.
Some analysts said South Korea would likely pull out the roughly 175 South Korean managers who remain at the complex.
Mr Kim said South Korea set the deadline for tomorrow because the remaining workers at Kaesong are running short of food and medicine. He said the companies there are suffering economically because of the shutdown.
To resolve deadlocked operations at Kaesong, Mr Kim said North Korea should first allow some South Koreans to cross the border to hand over food and medicine to the managers.
North Korea did not immediately respond, according to the Unification Ministry.
North Korean state television showed fighter jets in the sky and soldiers parading in front of leader Kim Jong Un at a ceremony in Pyongyang marking the 81st anniversary of the founding of the military.
Tens of thousands of people visited Pyongyang's Kumsusan Palace to celebrate the anniversary.
The demand for talks follows a lull in what had been a period of rising hostility between the Koreas.
North Korea has recently eased its threats of nuclear war and expressed some tentative signs of interest in dialogue.
Its demands, including dismantling all US nuclear weapons, go far beyond what its adversaries will accept, but the US, South Korea and China have also pushed for an easing of animosity.
The Kaesong complex is the last major symbol of cooperation remaining from an earlier era that saw the Koreas set up various projects to facilitate better ties.
The factory park has operated with South Korean know-how and technology and with cheap labor from North Korea since 2004.
It has weathered past cycles of hostility between the rivals, including two attacks blamed on North Korea in 2010 that killed 50 South Koreans.