North Korea is severing all relations with South Korea and cutting communications links, its official news agency reported.
The agency said the North will expel all South Korean personnel from a jointly-run industrial estate at Kaesong north of the border, and ban South Korean ships and planes from its territorial waters and airspace, citing a spokesman for the North's national reunification committee.
The North Korean statement was also reported by China's Xinhua news agency.
Earlier, North Korea's military accused the South Korean navy of trespassing in its waters and threatened military action in response.
The accusation came amid high tension sparked by an investigation into the sinking of a South Korean warship near the disputed Yellow Sea border in March.
The North's military made its complaint in a message to the South's armed forces, the Korean Central News Agency reported.
North Korea said dozens of the South's naval ships had intruded into the North's waters over the past ten days.
'This is a deliberate provocation aimed to spark off another military conflict in the West (Yellow) Sea of Korea and thus push to a war phase the present North-South relations that reached the lowest ebb,' KCNA quoted the message as saying.
If the intrusions continued, the North 'will put into force practical military measures to defend its waters as it had already clarified and the South side will be held fully accountable for all the ensuing consequences.'
A defence ministry spokesman in Seoul denied any of the South's ships had crossed the border known as the Northern Limit Line.
The North refuses to accept the line drawn by the South's allies after the 1950-53 war and demands it run further to the south.
The area was the scene of naval clashes in 1999 and 2002 and of a firefight last November that left a North Korean patrol boat in flames.
Investigators concluded last week that a North Korean torpedo sank a South Korean warship in the area on 26 March.
South Korea announced several punitive measures yesterday.
The North has denied responsibility and has threatened 'all-out war' if there is any attempt to punish it.
