US and South Korean defense chiefs have agreed to 'co-ordinate' any response to North Korea after Pyongyang's artillery attack on a South Korean island.

In a phone call earlier in the day, Defense Secretary Robert Gates told South Korean Defense Minister Kim Tae-young that the shelling was a violation of the armistice agreement and expressed appreciation for Seoul's 'restraint', press secretary Geoff Morrell said.

The two 'agreed their departments should consult closely and coordinate on any response to this act of aggression by the North,' Mr Morrell said in an email.

The State Department earlier vowed Washington would pursue a 'measured and unified' response to North Korea's artillery attack.

UN Secretary-General Ban Ki-moon condemned the deadly artillery attack on a South Korean island.

Mr Ban, in a statement, called the attack 'one of the gravest incidents since the end of the Korean War'.

Two soldiers died and several were injured after North Korea fired dozens of shells at a South Korean border island today.

South Korean troops based on Yeonpyeong island fired back and the military was put on top alert, the defence ministry said.

Mr Ban called for restraint and insisted that any differences between the north and south 'be resolved by peaceful means and dialogue'.

The South sent a fighter jet to the area, which is close to a disputed maritime border on the west of the divided peninsula and the scene of deadly clashes in the past.

South Korea was conducting military drills in the area at the time but said it had not been firing at the North.

The ministry said 15 marines on the island were injured, five of them seriously. Three civilians were also hurt.

A resident of the island near the tense Yellow Sea border told YTN that some 50 shells landed and dozens of houses were damaged.

South Korean President Lee Myung-Bak held an emergency security meeting, a presidential spokesman said.

'He is now in an underground war room to discuss possible responses with ministers of related agencies and national security advisers ... we are closely watching the situation,' the spokesman said.

President Lee urged the officials to 'handle it (the situation) well to prevent further escalation,' the spokesman said.

South Korea has warned the North that it would 'sternly retaliate' to any further provocations and said the attack was a clear violation of an armistice between the two countries.

However, North Korea said that South Korea had initiated firing of shells, prompting it to take military action.

'Despite our repeated warnings, South Korea fired dozens of shells from 1pm ... and we've taken strong military action immediately,' the North's official KCNA news agency said in a brief statement.

It did not elaborate whether North Korea had suffered any damage from the exchange of fire.

Television footage showed huge plumes of smoke rising from the island.

A defence ministry spokesman said: 'After both sides exchanged fire, we sent a warning message by loudspeaker and are watching the situation for now. A Class-A military alert issued for battle situations has been imposed immediately.'

Residents have been moved to safe areas and the military and police are checking the number of casualties.

Defence Minister Kim Tae-Young said the South fired 80 shots in response to the North's shelling.

'We were carrying out naval, air force and army training exercises and they (the North) seem to have opened fire in objection,' a military official was quoted as saying by YTN.

International concern over attack

China has expressed concern over the exchange of fire and urged the two sides to work toward peace and stability on the Korean peninsula.

The US has condemned the attack and demanded the action cease.

'The United States strongly condemns this attack and calls on North Korea to halt its belligerent action,' the White House said in a statement.

Elsewhere, Japanese Prime Minister Naoto Kan has ordered his ministers to prepare for any eventuality.

'I ordered (ministers) to make preparations so that we can react firmly, should any unexpected event occur,' Mr Kan told reporters after an emergency meeting of cabinet.

'I ordered them to do their utmost to gather information,' he said.

A Russian Foreign Ministry official said that North Korea's artillery attack was unacceptable and called on both sides to show restraint to prevent a wider conflict.

British Foreign Secretary William Hague added his voice to the calls of condemnation.

Mr Hague said: 'The UK strongly condemns North Korea's unprovoked attack on the South Korean island of Yeonpyeong Island. Such unprovoked attacks will only lead to further tensions on the Korean peninsula.

'We strongly urge North Korea to refrain from such attacks and adhere to the Korean Armistice agreement.'