The North has routinely issued such war rhetoric against South Korea and the U.S. The latest warning, however, came nearly three weeks after the rival Koreas failed to reach a breakthrough in their first dialogue in months.
Tensions on the Korean peninsula rose sharply last year over two deadly attacks: the sinking of a South Korean naval ship blamed on the North and a North Korean artillery barrage that killed four people on a front-line South Korean island. North Korea denies it was involved in the ship sinking, which killed 46 South Korean sailors.
On Sunday, the North used harsh rhetoric against South Korea and the U.S., calling their joint drills a "dangerous military scheme."
"Our military and people will take stern military countermeasures against the American imperialists and the [South Korean] traitors' group, because they are challenging us with aggressive military action," the North's military said in a statement carried by the official Korean Central News Agency.
It accused South Korea and the U.S. of plotting to launch "limited war" and topple Pyongyang's communist government. If provoked, the North will start a "full-scale" war and turn Seoul into a "sea of fire," the statement said.
Earlier Sunday, the North's military warned that it would fire directly at South Korean border towns and destroy them if Seoul continued to allow activists to launch propaganda leaflets toward the communist country.
In a separate statement carried by KCNA, it accused South Korean activists and lawmakers of flying balloons carrying hundreds of thousands of leaflets critical of North Korea's government, one-dollar bills, DVDs containing corrupt animation files and other materials on the North's most important national holiday, an apparent reference to leader Kim Jong Il's 69th birthday, which was Feb. 16.
It was unclear whether activists have launched more balloons since then and if they plan additional leafletting in coming days.
The South Korean Defense Ministry confirmed it had received the North's warning. A ministry official said South Korea's military keeps a close watch on North Korean military movement. The official spoke on condition of anonymity, citing department rules.
Defense Minister Kim Kwan-jin told Parliament Friday that North Korea may launch new attacks this spring and that South Korea's military was ready to cope with any types of hostilities.
On Monday, South Korea and the U.S. are to launch drills aimed at rehearsing how to respond to any potential emergency on the Korean peninsula.
About 12,800 U.S. troops and some 200,000 South Korean soldiers and reservists will take part in the drills, which will last 11 days and involve computer war games, live-firing exercises and other field training, according to the U.S. and South Korean militaries.
Pyongyang has called the drills a preparation to invade North Korea, though South Korean and U.S. officials have repeatedly said the maneuvers are purely defensive and that they have no intention of attacking.
After weeks of tension following November's bombardment, North Korea pushed for dialogue with South Korea and expressed a desire to return to stalled international disarmament talks on its nuclear program.
Military officers from the two Koreas met earlier this month but failed to produce any progress, with both sides accusing the other of rupturing the dialogue. North Korea later threatened not to hold any more military talks with Seoul.
The two Koreas are still technically at war because the 1950-53 Korean War ended with an armistice, not a peace treaty. About 28,500 U.S. troops are stationed in South Korea to help deter potential aggression by the North.