Protesters shout slogans near the firing target depicting North Korea's leader Kim Jong Il, left, and his son Kim Jong Un, right, during an anti-North Korea rally marking the June 29, 2002 sea skirmish with North Korea, Seoul, South Korea, Wednesday, (AP).
A Pyongyang government spokesman accused the South's frontline army units of displaying slogans slandering the North's "army, system and dignity" and said they are "little short of a clear declaration of war".
The spokesman, in a statement carried by the official news agency, vowed to respond to any provocations with a "merciless retaliatory sacred war".
The North's military command made a similar threat in a separate statement, vowing retaliation for insults to the country's political leadership.
The South's Hankyoreh newspaper Monday quoted some of the slogans as reading "Let's stick swords and guns into the hearts of North Korean enemy army!" and "A club is the only medicine for a mad dog!"
The North made similar threats when South Korean reservists were found to be using pictures of Pyongyang's ruling Kim dynasty as rifle-range targets.
That practice has since been stopped.
Tensions have been high for well over a year, since the South accused the North of torpedoing a warship in March 2010, killing 46 sailors.
Pyongyang denied the charge but went on to shell a border island last November, killing four South Koreans including two civilians.
The latest warning came as 12 South Korean government officials and businesspeople travelled to a jointly run mountain resort in the North to discuss the ownership of South Korean assets there.
The South's unification ministry, which handles cross-border affairs, said the talks ended without any "substantial" discussions because the North unilaterally explained its own position.
Mount Kumgang opened in 1998 as a symbol of reconciliation and helped the impoverished communist state to earn tens of millions of dollars a year.
But the South suspended visits after a North Korean soldier shot dead a Seoul tourist who had strayed into a restricted military zone in 2008.
Last year the North seized or sealed off several South Korean properties in protest at the failure to restart the tours.
On June 17, Pyongyang warned it would dispose of properties in the zone, and asked South Korean parties to visit Kumgang by June 30 to discuss the process.
The ministry said the North should respect all agreements with private businesses and with Seoul's government, and protect the ownership rights of the South's firms.