North Korea has ordered most of the South Korean staff working at a joint tourism project in the North to leave.
All but 16 of the nearly 100 South Koreans and ethnic Koreans from China that remain at the Mount Kumgang resort will be expelled by May 3.
The expulsions came with ties between Pyongyang and Seoul deteriorating amid suggestions that the North was to blame for the sinking of a South Korean naval vessel.
Tours to the Mount Kumgang resort, once hailed as a symbol of co-operation between the two neighbours, were halted in 2008 after a North Korean soldier shot dead a South Korean tourist.
The South has demanded a joint investigation into the death.
The resort earned impoverished North Korea millions of dollars a year and Pyongyang has complained it has suffered serious losses due to its closure.
Earlier this month, a fire station, duty-free shop, cultural centre, spa and reunion centre for families separated by the 1950-53 Korean War at the site were seized by North Korean authorities.
Seoul said that the seizure violated the contract it reached with North Korean officials and had dealt another blow to the North's already tarnished reputation for being an reliable business partner.
The North did not immediately give a reason for Friday's expulsion, but after seizing the South-owned buildings on April 23 it criticised Seoul for "deliberately" linking the sinking of the Cheonan to the North.
The South Korean warship went down in the Yellow Sea, close to a disputed maritime border with the North in March, killing 46 sailors.
Investigations have suggested that the explosion that ripped a whole in the vessel was caused by something external, possibly a mine or a torpedo.
Lee Myung-bak, South Korea's president, was expected to discuss the sinking in closed-door talks with Hu Jintao, his Chinese counterpart, on Friday in Shanghai.
Before the meeting, Hu expressed his condolences for the loss of the sailors.
"I would like to use this occasion to offer condolences and consolation to the victims of the Cheonan and their families," Seoul's Yonhap news agency quoted Hu as saying.
China is North Korea's sole major ally and the key provider of food and energy to the impoverished state.
Before meeting Lee, Hu held talks with Kim Yong Nam, the North's number two official, at a state guesthouse.
"The bottom line is that Pyongyang knows that Beijing will not forsake them even if they behave in this provocative manner," Peter Beck, a specialist on Korean affairs who is a researcher at Stanford University, said.
It was unclear if Lee would meet Kim in Shanghai.
Relations between the two Koreas, who are still technically at war, have been increasingly hostile since Lee became president of the South two years ago and ended the provision of generous aid packages to the North.