North Korea said on Thursday it had scrapped a tourism deal with South Korea and would "freeze" some assets owned by Seoul at a mountain resort in the communist state.
The North also said it was expelling some South Korean personnel from Mount Kumgang on its east coast and would let a new partner take over the tour business there.
The announcement was set to further strain relations, which are already tense following an unexplained explosion which sank a South Korean warship near the disputed border on March 26.
Pyongyang had threatened "extraordinary measures" unless the South agreed by April 1 to resume tours to the resort.
The Seoul government suspended them in July 2008 after North Korean soldiers shot dead a visiting South Korean housewife.
The sanctions-hit North has been stepping up pressure on the South to restart the business, which previously earned it tens of millions of dollars a year.
The North, complaining it had suffered "enormous" economic losses, said in a statement on the official news agency that it would allow an unspecified third party to take over the tours from South Korean firm Hyundai Asan.
It said agreements with Hyundai were no longer valid.
The North also threatened to reexamine its joint industrial park with South Korea at Kaesong just north of the border unless relations improve with the Seoul government, which it described as "hell-bent on confrontation".
Some 42,000 North Koreans work at 110 South Korean-funded plants at Kaesong, which is also a valuable source of hard currency.
"Relations will be strained further, with both sides locking horns for a while," said Dongguk University professor Kim Yong-Hyun.
"If North Korea is found to have been involved in the sinking of the South Korean ship, tension will escalate with cross-border exchanges cut off completely."
Seoul has not so far accused Pyongyang of involvement in the sinking pending an investigation.
Hyundai Asan began the Kumgang tours in 1998 as a reconciliation project. Nearly two million South Koreans travelled there in the next decade and the business earned the cash-strapped North some 487 million dollars.
The South says the two governments must reach firm agreements on the safety of visitors before tours can resume. It says the North should also permit a joint investigation into the shooting and apologise for the killing.
The North said that as an initial measure it would "freeze" a reunion centre for separated families built by the Seoul government, a fire station, a cultural centre, a hot springs resort and a tax office and expel all their management personnel.
It was unclear what the "freeze" order entailed in practical terms. A hotel at the resort did not seem to be included in the order.