North Korea is pulling more than 50,000 workers out of the Kaesong joint industrial zone with South Korea, cutting its last direct economic link with South Korea.
Kim Yang Gon, a senior ruling party official, told the North's official Korean Central News Agency all operations in the zone would be suspended while officials decided whether to re-open it or close it permanently.
Operations of South Korean companies in the industrial zone contributed an estimated $90 million each year to the North Korean economy. Last week, North Korea blocked South Korean access to the zone.
There were mixed messages from Seoul earlier in the day about whether the North is preparing for a fourth nuclear test.
Unification Minister Ryoo Kihl-jae told lawmakers there are signs of activity at the North's Punggye-ri nuclear test site. Later, South Korea's Defense Ministry said they have seen no such evidence.
U.N. Secretary-General Ban Ki-moon, a Korean, urged North Korea to refrain from "further provocation." He said a fourth nuclear test would breach U.N. Security Council resolutions.
On Sunday, Kim Jang-soo, chief national security adviser to South Korean President Park Geun-hye, said a missile test or some other provocation could come on or near Wednesday, the date by which the North has suggested diplomats leave the capital, Pyongyang.
He said the North's real objective is to force diplomatic concessions from Washington and Seoul, but added South Korea is maintaining its military readiness whether or not Pyongyang's threats "are merely rhetoric."
North Korea, angered by a new round of international sanctions following a recent nuclear test, has threatened to retaliate with attacks on the United States, South Korea and U.S. allies in the Asia Pacific region. The North Korean military command recently announced it was "authorized" to attack the United States using "smaller, lighter and diversified" nuclear weapons.
On Monday, the commander of U.S. forces in South Korea, General James Thurman, canceled a scheduled trip to Washington to testify before several congressional committees this week, because the military says based on developments, it is prudent for Thurman to remain on the peninsula.
North Korea will mark the 101st anniversary of the birth of its founding father, Kim Il Sung, on April 15 with pomp, ceremony and displays of military strength. Kim Il Sung led the communist country from 1948 until his death in 1994. His grandson, Kim Jong Un, currently holds power.