Pyongyang is to pull out all of its 53,000 workers from the only joint complex operated by the two Koreas.
North Korean state media quote the secretary of the Workers Party central committee, Kim Yang Gon, saying all the country's employees in the Kaesong industrial zone will withdraw.
An announcer on Pyongyang radio quotes Kim, who visited Kaesong on Monday, as saying operations there will be temporarily suspended and the fate of the complex will be examined. This depends, Kim is quoted as saying, on the attitude of the South Korean authorities in the coming days whom he characterizes as "military warmongers" seeking to make the joint industrial zone a point of confrontation.
North Korea last week had stopped issuing the daily permits for South Korean managers and cargo to enter the complex, which is just north of the border.
The complex has been a major source of hard currency for the North Korean government as the workers' salaries go to the state, not directly to the employees of the small factories, which assemble household goods.
South Korea's Unification Minister, Ryoo Kihl-jae, was handed a note about North Korea's announcement while he was testifying before a national assembly committee.
Ryoo said this can be "judged as the situation is getting worse."
Asked if South Korea would also pull its managers out of the complex if all the North Korean workers depart, Ryoo says it is too soon to say, and that a decision will be studied.
Analysts have previously said any suspension of operations at Kaesong would significantly increase already-high tension on the Korean peninsula.
Diplomats, speaking not for attribution, have considered the plant's closure a red line that, if crossed, could prompt fresh travel advisories from embassies in Seoul.
Ryoo, who is the South Korean government's point man on North Korea, earlier Monday gave the same committee conflicting statements on whether there are indications North Korea is preparing for a fourth nuclear test at the Punggye-ri site.
Ryoo denied making an earlier statement, recorded on tape, that there has been "such a sign."
That puzzling explanation came minutes after the Ministry of National Defense issued a statement saying that movements of people and vehicles at Punggye-ri appeared to be usual and routine.
The Unification Ministry itself, which is in charge of North-South relations in lieu of diplomatic ties, states another nuclear test does not appear to be "imminent."
The conflicting statements could indicate confusion in the young administration of President Park Geun-hye. In her first 45 days in office, she and her government have had to determine how to respond to an escalating onslaught of threats from the rival North.
Official statements from Pyongyang have recently hinted that North Korea has the capability to produce both plutonium and uranium fueled weapons and that it has developed a warhead small enough to fit atop a missile. But most experts doubt it has yet achieved that capability.
Story continues below photo gallery.
North Korean children hold up red scarves to be tied around their necks during an induction ceremony into the Korean Children's Union held at a stadium in Pyongyang, April 12, 2013.
Two military officers admire displays at a flower show featuring thousands of Kimilsungia flowers, named after the late North Korean leader Kim Il Sung, Pyongyang, April 12, 2013.
South Korean soldiers stand guard at an observation post near the demilitarized zone (DMZ) which separates the two Koreas in Paju, north of Seoul April 11, 2013.
Female North Korean soldiers patrol along the banks of Yalu River, near the North Korean town of Sinuiju, opposite the Chinese border city of Dandong, April 11, 2013.
A North Korean man blocks his face with his hand from being photographed as he and other residents take a ferry in Yalu River, near the North Korean town of Sinuiju, opposite the Chinese border city of Dandong, April 11, 2013.
People take part in an oath-taking before the statues of late North Korean leaders Kim Il-sung and Kim Jong-il on Mansudae Hill in Pyongyang, April 10, 2013. (KCNA)
Anti-North Korean protesters release balloons with peace messages on the Grand Unification Bridge leading to the North near the demilitarized zone separating the two Koreas, in Paju, north of Seoul, April 10, 2013.
South Koreans arrive with their belongings from North Korea's Kaesong at the customs, immigration and quarantine office near the border village of Panmunjom, in Paju, north of Seoul, South Korea, April 9, 2013.
Visitors look at the industrial complex in Kaesong, North Korea, through binoculars at Dora Observation Post in the demilitarized zone (DMZ) near the border village of Panmunjom, in Paju, South Korea, April 9, 2013.
A South Korean military vehicle passes by gates leading to the North Korean city of Kaesong at the customs, immigration and quarantine office near the border village of Panmunjom, April 8, 2013.
An elementary school teacher orders her students to leave as they watch South Korean housewives denounce annual South Korean-U.S. military exercises, near the U.S. Embassy in Seoul, April 8, 2013.
South Korean army soldiers patrol along a barbed-wire fence near the border village of the Panmunjom, in Paju, South Korea, April 8, 2013.
North Korean military dogs run to a target with a portrait of South Korean Defence Minister Kim Kwan-jin during a military drill, April 6, 2013. (KCNA)
On Sunday, the president's national security chief stated North Korea could be poised to launch one or more of its untested medium-range missiles around April 10th.
Officials in Pyongyang last week advised the 24 diplomatic missions there they should consider evacuating their embassies, saying safety could not be guaranteed after April 10th.
U.N. Secretary-General Ban Ki-moon, speaking to reporters at the Hague, said North Korea "cannot go on like this, confronting and challenging the authority of the Security Council and the international community."
He also called on Pyongyang to "refrain from taking any further provocative measures."
Japan's defense minister has authorized his country's self defense forces to shoot down any incoming North Korean missile. This is the first time such authorization has been given prior to any announcement from Pyongyang of a planned missile test.
The Defense Ministry in Tokyo also confirms the United States is considering deploying high altitude aerial reconnaissance "Global Hawk" drones to Misawa air base in northern Japan to monitor North Korea.
Meanwhile, the commander of U.S. forces in South Korea, General James Thurman, has canceled a scheduled trip to Washington. He was to testify before several congressional committees this week but the military says based on developments, it is prudent for the general to remain on the peninsula.
US postpones nuclear test
The U.S. Defense Department has delayed a test launch from California of a Minuteman 3 intercontinental ballistic missile. Officials say while the test had no connection to North Korea, it was felt best to postpone it so as to not further exacerbate tension.
North Korea increased its bellicose rhetoric after the U.S. Air Force sent long-range strategic bombers to fly over South Korea during a current joint annual exercise.
North Korea has recently taken its threatening rhetoric to an unprecedented level.
After a missile launch and nuclear test in violation of U.N.
sanctions, Pyongyang has announced an abrogation of the 1953 armistice, threatened the United States and its Pacific bases with preemptive nuclear strikes and declared that a state of war exists between the North and the South.
Top officials of South Korea's government, including the president, have repeatedly warned North Korea through public statements it faces a punishing military response should the South feel that its citizens are endangered.
U.S. military officers in South Korea, speaking to VOA News (on condition they not be identified) in recent days, have expressed concern about an overreaction or accidental firing by South Korean forces, now on high alert.
Agreements between the U.S. and South Korean militaries call for close consultations on any response. General Thurman, as head of the Combined Forces Command, would also lead South Korean forces if full-scale war erupts.
The chairman of the U.S. Joint Chiefs of Staff, General Martin Dempsey, on Sunday said he does not believe North Korea is poised to engage in military action but he "can't take the chance that it won't."