The move has reportedly been met with massive discontent, with the Associated Press reporting that North Koreans were burning piles of bank notes in anger.
South Korean media reported that inside the North the announcement led to a sharp drop in external trade and caused sharp increases in prices for essentials such as rice.
Other reports said that North Korea had ordered its border guards to open fire on anyone who crosses its border without permission, and speculated it could be an attempt to thwart defections by people disgruntled over the currency reform.
The Chosun Sinbo, a Japan-based publication with close ties to the North's leaders, quoted Jo Sung-hyun, the North Korean central banker, as saying people were
changing currency at hundreds of locations.
He defended the government's move, saying: "The reason for this [renomination] is to promote currency distribution and building a stronger country. Also it will support the rights of the labourers and better their lives," Jo was quoted as saying.
Jo said the move would strengthen order inside the country and denied it was a move to encroach on the free market system.
The amount each person could exchange was limited to 100,000 won (about $740 at the old official exchange rate).
Analysts have said the move could be a way of clamping down on merchants.
Business people who have acquired cash from outside the official economy could face punishment if they reveal hoarded wealth by converting currency.