North Korea held a live-fire drill near its maritime border with South Korea on Tuesday, with Seoul vowing a "strong" response if any shells fall on its side of the disputed boundary.
A similar exercise a month ago resulted in the two rivals firing hundreds of artillery shells into each other's territorial waters.
North Korea had given advance notice of the drill which began around 2:00 pm (0500 GMT), the South Korean defence ministry said.
"Our military is fully prepared," ministry spokesman Kim Min-Seok said.
"If any shell lands on our side of the border, South Korea will respond strongly."
The Yonhap news agency reported that South Korean jet fighters had been scrambled to patrol the border area.
Fishing vessels had been warned off and local officials on the border islands of Yeonpyeong and Baengnyeong said residents were advised to leave their homes.
"They've been told to move into shelters," a local official on Baengnyeong told AFP, adding that the sound of artillery shelling could be heard in the distance.
North Korea carried out a similar drill on March 31 during which a number of shells dropped into South Korean waters, prompting South Korea to fire back.
The exchange was limited to untargeted shelling into the sea, but fuelled tensions that had already risen after North Korea threatened to carry out a nuclear test.
Tuesday's announcement followed analysis of recent satellite images suggesting the North was indeed preparing to conduct its fourth atomic detonation, with stepped-up activity detected at its main nuclear test site.
It also followed the visit to Seoul last week by US President Barack Obama, who angered Pyongyang by demanding that the North abandon its nuclear weapons programme and by threatening tougher sanctions if it went ahead with another test.
Flouting Obama's warning
"North Korea's continued pursuit of nuclear weapons is a path that leads only to more isolation," Obama told American troops based in Seoul.
"It's not a sign of strength. Anybody can make threats. Anyone can move an army. Anyone can show off a missile," he said.
North Korea denounced Obama's visit as provocative and said it had only reaffirmed Pyongyang's policy of preparing to fight "a full-scale nuclear war".
North Korea has conducted three nuclear tests, the most recent -- and most powerful -- in February last year.
The de-facto maritime boundary between the two Koreas -- the Northern Limit Line -- is not recognised by Pyongyang, which argues it was unilaterally drawn by the US-led United Nations forces after the 1950-53 Korean War.
Both sides complain of frequent incursions by the other and there were limited naval clashes in 1999, 2002 and 2009.
In November 2010, North Korea shelled Yeonpyeong island, killing four South Koreans and briefly triggering concerns of a full-scale conflict.
Border island residents have become used to the North's behaviour and some brushed off Tuesday's drill.
"I'm so sick of it," said one inn owner on Baengnyeong island.
"The whole thing is just scaring my customers away. I'm more likely to die from business losses than an attack from the North," she told AFP by telephone.
Inter-Korean ties had seemed to be enjoying a thaw earlier this year when the North -- following rare, high-level official talks -- hosted the first reunion for more than three years of families separated by the Korean War.
But tensions began to escalate after the South launched its annual joint military exercises with the United States in late February.
The North was also angered by a UN report detailing Pyongyang's record of human rights abuses and by the UN Security Council's criticism after it test-fired two medium-range missiles in March.