North Korea says it has entered a "state of war" with South Korea in the latest threat aimed at Seoul and Washington.
Amid escalating tensions, Pyongyang also threatened to shut down a factory complex that is the last major symbol of inter-Korean cooperation.
South Korea said the North's threats "are never acceptable" but noted there was no visible movement of troops at the border.
Russia urged restraint, while Britain said the threat risks further isolating North Korea, one of the world's most reclusive states.
"We have made clear to North Korea that its long term interests will only be served by constructive engagement with the international community. These threatening statements will only seek to isolate it further," a Foreign Office spokesperson said.
Travel advice for British nationals was "under constant review and we will update it as necessary".
The announcement by Pyongyang was broadcast by the official Korean Central News Agency.
"As of now, inter-Korea relations enter a state of war and all matters between the two Koreas will be handled according to wartime protocol," it said.
"The long-standing situation of the Korean peninsula being neither at peace nor at war is finally over."
The statement also warned that any military provocation near the North-South land or sea border would result "in a full-scale conflict and a nuclear war".
North Korea's leader Kim Jong-Un
Hours later, a spokesman for the North Korean office controlling the Kaesong industrial complex threatened to close the factory park, saying the South was undermining its dignity.
He was referring to media reports saying the factory - just across the border in North Korea - had remained open because it is a source of hard currency for the North.
The two Koreas have always technically remained at war because the 1950-53 Korean War ended with an armistice rather than a peace treaty.
Earlier this month, the North said it was ripping up the armistice and other bilateral peace pacts signed with the South in protest against South Korea-US joint military exercises.
Russian foreign ministry official Grigory Logvinov said: "We expect all sides to show maximum responsibility and restraint, and that no-one will cross the line after which there will be no return."
"Naturally, we cannot remain indifferent when an escalation of tensions is taking place at our eastern frontiers," the diplomat told the Interfax news agency. "We cannot but worry."
South Korea's defence ministry spokesman Kim Min-seok said: "North Korea's continuing threats against South Korea such as saying it is 'entering a state of war' are never acceptable since it is harming peace and stability on the Korean peninsula."
The US has used B-2 bombers as a 'deterrence' measure in the region
He said recent military exercises with the US "were defensive in nature against North Korea's possible provocations".
The ministry also said "no particular troop movement" had been observed along the border.
Former South Korean foreign minister Han Sung Joo told Sky News that the announcement amounted to "certainly more than rhetoric, even by North Korean standards".
The US said it was taking the new threat "seriously" but said it was following a familiar pattern.
"We've seen reports of a new and unconstructive statement from North Korea. We take these threats seriously and remain in close contact with our South Korean allies," said Caitlin Hayden, spokeswoman for the National Security Council.
Most analysts still believe this will remain a rhetorical rather than a physical battle, but the situation has now become so volatile that any slight miscalculation carries the potential for rapid escalation.
Sky's Asia Correspondent Mark Stone said: "It is more rhetoric by North Korea until they actually do something. Wars tend to begin with bangs not announcements on state news agencies, so this is Mr Kim pushing the rhetoric up another level.
"The problem is, he hasn't got any more levels to go to after this other than actual war - that is the big worry and the big unknown. Does his belligerence have a limit or not?"
South Korean soldiers at a check point during a drill near the border
Sources in Pyongyang say life is continuing as normal in the city.
There are signs of civil construction with thousands of workers. Many of them are conscripts, and if war was imminent, then Kim would have called them up and they would not be busy building apartment blocks and hotels.
Earlier this week, the North's leader Kim Jong-Un has ordered missile units to prepare to strike US mainland and military bases, vowing to "settle accounts" after US stealth bombers flew over the South.
US Defence Secretary Chuck Hagel stressed that Washington would not be cowed by Pyongyang's threats and stood ready to respond to "any eventuality".
The standoff has its roots in the North's successful long-range rocket launch in December and the third nuclear test it carried out in February.
Both events drew UN sanctions that incensed Pyongyang, which then switched the focus of its anger to the annual joint South Korea-US military drills.
As tensions escalated, Washington has maintained a notably assertive stance, publicising its use of nuclear-capable B-52s and B-2 stealth bombers.
The long-distance deployment of both sets of aircraft was intended as a clear signal of US commitment to defending the South against any act of aggression.
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