Chang Sung-min, a respected intelligence aide to former South Korean president Dae-jung, revealed that all 8000 spent fuel rods stored at its Yongbyong nuclear complex had been processed.
This gives the communist state the means to make more atomic weapons, says Sung-min in a report from the Yonhap news agency.
The report also revealed that UN-based North Korean diplomats had told US officials in new York last week that the reprocessing was completed on 30 June.
Seoul's Foreign Ministry later issued a statement saying that South Korea and the United States had exchanged information about the North's nuclear activities. It declined to elaborate.
This latest development also reveals that the North Koreans have made more progress than previously suspected in amassing the raw material for making nuclear arms.
South Korea's intelligence agency told parliament last week it estimated that the North had recently reprocessed a small number of the 8,000 spent fuel rods stored at Yongbyon, a city 75 km (47 miles) north of Pyongyang.
The rods were part of a plutonium-based nuclear weapons programme that was frozen under a 1994 nuclear agreement between North Korea and the United States.
The pact fell apart earlier this year after the US exposed a top secret North Korean scheme to enrich uranium for bombmaking.
“North Korean delegates told US officials in an unofficial meeting in New York on July 8 that the reprocessing of spent fuel rods was completed on June 30,” said Chang Sung-min.
The news of the North’s enhanced nuclear capability comes amid frantic efforts by Seoul and Washington to pressure Pyongyang in giving up its nuclear programme.
South Korea has been pushing for multilateral talks involving countries like US, China and Japan with the North to resolve the nuclear crisis looming over the Korean peninsula.
However North Korea has been insisting on one-to-one talks with the US. Leaders of the country have always justified the weapons programme by saying the country has the right to defend itself