North Korea has fired more than 200 artillery rounds near a disputed maritime border with South Korea in another escalation of tension between the rivals and prompting the South to take "corresponding" action with live fire drills.
North Korea later said it conducted firing drills as a "natural response" to military actions by South Korea's "military gangsters" in recent days.
It also threatened an "unprecedented strong response" if Seoul continued to make provocative moves.
The exchange led residents of two remote South Korean islands on the western maritime frontier to evacuate to bomb shelters at the instruction of the South's military before it fired live rounds towards the disputed Northern Limit Line (NLL) border.
The firing by North Korea caused no civilian or military damage in the South, South Korea's military said.
"This is an act of provocation that escalates tension and threatens peace on the Korean peninsula," South Korea's Defence Minister Shin Won-sik said as he supervised the firing drills.
The North Korean artillery shells all landed on the northern side of a disputed maritime border, spokesman Lee Sung-joon said, adding the South Korean military had been monitoring the North's moves along its shores with the co-operation of the US military.
South Korea's Defence Ministry said marine brigades based on the Yeonpyeong and Baengnyeong islands fired at sea to the south of the NLL border demonstrating "overwhelming operational response".
The South Korean drills involved mechanised artillery and tanks.
North Korea's Army General Staff said its defensive coastal units fired 192 rounds as part of its drills "as natural response by our military against military actions by South Korea's military gangsters", the official KCNA news agency reported.
The drills had no impact on South Korean islands near the maritime border as claimed by the South, the statement said, calling the assertion "an attempt to mislead public opinion".
China, which is North Korea's main political ally, urged restraint and called on the two sides to resume dialogue.
Yeonpyeong - home to more than 2000 residents and troops stationed there - is about 120km west of Seoul and accessed by ferries.
Leif-Eric Easley, professor of international studies at Ewha University in Seoul, said it was not unusual for North Korea to fire artillery in the area during winter drills.
"What's different this year is ... Kim Jong-un has publicly disavowed reconciliation and unification with the South," he said.
In remarks to a major party meeting last week, the North Korean leader said unification with the South was not possible and Pyongyang was fundamentally changing its policy towards the South, which it now sees as an enemy state.
The waters near the disputed NLL have been the site of several deadly clashes between the North and South Korea including skirmishes involving warships and the sinking of a South Korean navy corvette early in 2010 by what was believed to be a North Korean torpedo.
North Korea has increasingly warned in recent days that the situation on the Korean peninsula is spiralling towards war because of dangerous moves by the US and South Korean militaries.
Both Koreas have vowed crushing military responses if attacked.
