North Korea appears to be preparing for a third nuclear test after a long-range rocket launch planned for this month, a report said Sunday.

Preparations are underway in the northeastern town of Punggye-ri, where the North carried out two previous tests in 2006 and 2009, Yonhap news agency said, citing a Seoul intelligence official.

"Recent satellite images led us to conclude the North has been digging a new underground tunnel in the nuclear test site... besides two others where the previous tests were conducted," Yonhap quoted the source as saying.

Construction of the new tunnel appears to be nearly completed, said the source.

The impoverished but nuclear-armed North met international condemnation after it announced a plan to launch a rocket sometime from April 12 to 16 to mark the centenary of the birth of the country's late founding president Kim Il-Sung.

Pyongyang insists the launch is a peaceful space project but countries including the United States and South Korea view it as a disguised missile test in breach of UN resolutions.

The controversial launch plan led the US to suspend a recent deal to offer food aid to the North in return for a freeze on some nuclear and missile activities, drawing an angry response from Pyongyang.

The North, believed to have enough plutonium for six to eight bombs, tested atomic weapons in October 2006 and May 2009. Both were held one to three months after missile tests.

Pyongyang also in November 2010 disclosed to visiting US experts an apparently operational enriched uranium plant, which could potentially give the North another way to make atomic weapons.

Six-party nuclear disarmament talks on the North, which involve the two Koreas, the US, China, Russia and Japan, have been at a standstill since the last meeting in December 2008.

Analysts say a successful satellite launch would help bolster the leadership of new ruler Kim Jong-Un as he seeks to burnish his credentials after taking over from his father and longtime ruler, Kim Jong-Il.