"The puppet authorities had better bear in mind that the advanced pre-emptive strike of our own style will reduce everything opposed to the nation and reunification to debris, not just setting them on fire," a spokesman for the North's military was quoted as saying.
The warning, carried on the official KCNA news agency, came a day after a rare face-to-face meeting between military officials from North and South.
"The advanced pre-emptive strike of our own style will reduce everything opposed to the nation and reunification to debris, not just setting them on fire"
North Korean military statement
The meeeting had been requested by the North to discuss ways of improving communications between military commanders on boths sides, but apparently no progress as made on the issue.
During the talks North Korea demanded that the South stop activists from sending propaganda leaflets across the border, officials in Seoul said.
Without immediate action to halt the leaflets, South Koreans working on joint industrial projects in the North would face expulsion, they said.
The meeting in the heavily fortified "demilitarised zone" between the two countries lasted just 20 minutes.
The meeting was only the second direct contact between the two Koreas since since the conservative, pro-US Lee Myung-bak took the South Korean presidency at the start of the year.
|The latest balloons carried messages speculating on Kim Jong-il's health [EPA]
As Monday's talks were taking place South Korean activists launched a new batch of balloons across the border that they said carried 100,000 leaflets.
The South Korean government had warned the groups not to go ahead with the launch, saying it risked inflaming North-South tensions.
In its statement on Tuesday the North Korean military hit out at groups in the South it said were opposed to reunification.
"We clarify our stand that should the South Korean puppet authorities continue scattering leaflets and conducting a smear campaign with sheer fabrications, our army will take a resolute practical action as we have already warned," KCNA quoted the military as saying.
Such a "pre-emptive strike", it said, would be "beyond imagination relying on striking means more powerful than a nuclear weapon."
South Korean activists groups have been sending leaflets across the border by balloon for many years.
However, analysts say the latest round of leaflets have touched a nerve by referring to a taboo subject - the health of North Korea's leader, Kim Jong-il.
The reclusive Kim, who has not been seen for many weeks, is rumoured to have suffered a stroke in August.
North Korean officials insist the country's leader is in good health but have given no firm evidence of his well-being.
On Tuesday Japan's prime minister was quoted in media reports as saying he believed the North Korean lead was most likely in hospital.
Speaking to a Japanese parliamentary committee, Taro Aso said that intelligence reports indicated Kim was undergoing treatment but was still in charge and still capable of making decisions.
The state of Kim's health - and questions over who would succeed him - have been a topic of intense speculation since he failed to appear at a key anniversary parade in early September.
On Monday Japan's Fuji Television showed footage of a French brain surgeon who it said was personally recruited by Kim's eldest son, Kim Jong-Nam, to treat the 66-year-old leader in Pyongyang.