UN Secretary-General Ban Ki-moon says he is carefully monitoring the situation in Korea following a naval skirmish overnight.
Mr Ban has urged the North and South to resolve any disputes they have through dialogue.
The exchange of gunfire in the Yellow Sea last night left one North Korean vessel damaged.
North Korea's military has since told South Korea to apologise for a 'grave armed provocation'.
'The South Korean military authorities should make an apology to the North side for the armed provocation and take a responsible measure against the recurrence of the similar provocation,' the military supreme command said.
In a report, the command said its patrol boat was on a mission to confirm 'an unidentified object' on the North's side of the border.
While it was sailing back, South Korean warships chased it and opened fire, according to the report quoted by the North's Korean Central News Agency.
It said the North's craft 'lost no time to deal a prompt retaliatory blow at the provokers.
'Much flurried by this, the group of warships of the South Korean forces hastily took to flight to the waters of their side.'
South Korea's military also demanded an apology, saying the North's boat opened fire on a South Korean patrol boat.
Officials said no South Koreans were hurt, while the North's boat was set ablaze and sailed back.
The incident comes as the North is putting out peace feelers to its neighbour following months of tensions.
Analysts said its military statement was relatively mildly-worded.
