North Korea has warned that any attempt to shoot down a satellite it says it plans to launch will result in war.
The South and the US believe Pyongyang could be preparing to test-fire a long-range missile under the guise of a satellite launch.
The North also says it has put its military on full combat alert as an annual military exercise by US and South Korean forces begins.
The official news agency called the manoeuvres a dangerous provocation.
On Friday, the North said that the risk of conflict resulting from the drill meant it could no longer guarantee the safety of commercial flights through airspace it controls off the east coast.
A number of airlines have already re-routed their flights as a precaution.
In a statement published by the official Korean Central News Agency on Monday, the Korean People's Army warned that it was ready to use force against the South, the US and Japan.
"We will retaliate any act of intercepting our satellite for peaceful purposes with prompt counter-strikes by the most powerful military means," it said.
"Shooting our satellite for peaceful purposes will precisely mean a war."
The army earlier issued a separate statement saying all military personnel had been ordered "to be fully combat ready" in order to defend the nation.
It described the joint military exercise as "unprecedented in the number of the aggressor forces involved and in their duration".
In protest, it has now cut off its remaining military hotline with the South and ordered its 1.2 million-strong army to remain combat ready.
The closure of the hotline, which is used to exchange information about people and goods crossing to an industrial zone in the North Korean border city of Kaesong, left scores of South Koreans working there stranded.
Following talks in Seoul on Monday, the new US envoy to North Korea, Stephen Bosworth, said any launch by Pyongyang would be "very ill-advised".
A spokesman for South Korea's defence ministry said the North's threats were just "rhetoric" but that the armed forces were prepared to deal with any contingencies.
Last week, a report from Japan suggested it could send a destroyer carrying missile interceptor technology to the Sea of Japan (East Sea) in preparation for such an event.
Mr Bosworth is in the region to try to kick-start stalled six-nation talks on the North's denuclearisation. He said the US wanted to resolve the tensions through dialogue.
The 12-day military exercise involves about 50,000 US and South Korean troops, in what the two allies say is a rehearsal for the defence of the peninsula.
But North Korea is always rankled by the annual drill, claiming that it is a dry run for an invasion and dangerously provocative, the BBC's John Sudworth in Seoul says.
Some observers in South Korea, though, believe the North may be using the exercise as a pretext to clear the skies of traffic ahead of a missile launch, our correspondent adds.
Last week, North Korea raised objections to the annual exercise at a rare meeting between its generals and the US-led United Nations Command (UNC) in the South.
Tensions have risen since South Korea's President Lee Myung-bak began taking a harder line on the North on taking office a year ago.
In January, Pyongyang scrapped a series of peace agreements with the South over Seoul's decision to link bilateral aid to progress on denuclearisation.
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