|Images on local TV showed huge plumes of smoke rising from Yeonpyeong island [YTN television]
South Korea has returned fire after the North fired artillery shells onto a South Korean island and into the sea near the countries' disputed western border.
The South Korean military has said that one of its soldiers has been killed and three seriously hurt.
A resident of Yeonpyeong island near the tense Yellow Sea border told YTN television by phone that some 50 shells landed and dozens of houses were damaged.
Another island resident, Lee Jong-Sik, told YTN: "At least 10 houses are burning. I can't see clearly for the smoke. The hillsides are also on fire.
"We were told by loudspeakers to flee our homes." TV footage showed huge plumes of smoke rising from the island. Military officials said four soldiers are wounded in the shelling.
Steve Chao, Al Jazeera's Seoul-based correspondent, said that the island is the base of South Korea's second fleet that has been attacked by North Korea in the past.
"There was a joint South Korea-US naval exercise in the area yesterday," our correspondent said.
"A number of villagers has been evacuated to underground bunkers and at the same time the South Korean president was meeting with key South Korean ministers in an underground bunker in the Blue House, which is the seat of parliament in South Korea."
Fighter jets scrambled
A South Korean Joint Chiefs of Staff official said South Korea fired back almost immediately. The official spoke on condition of anonymity because of JCS rules.
"A North Korean artillery unit staged an illegal firing provocation at 2:34 pm (0534 GMT) and South Korean troops fired back immediately in self-defence," a ministry spokesman said.
South Korea said it has scrambled F-16 fighter jets to assess the situation on Yeonpyeong island.
The firing comes amid tension over North Korea's claim that it has a new uranium enrichment facility.
The countries' western maritime boundary has long been a flash point between the two Koreas.
The North does not recognise the border that was unilaterally drawn by the United Nations at the close of the 1950-53 Korean War.
North and South Korea have fought three bloody skirmishes near the maritime border in recent years, most recently in November 2009.
Concern in China
China expressed concern over Tuesday's exchange of fire and urged the two sides to work toward peace and stability on the Korean peninsula.
"We have taken note of the relevant report and we express concern over the situation," Hong Lei, a foreign ministry spokesman, told reporters.
"We hope the relevant parties do more to contribute to peace and stability on the Korean peninsula."
China is North Korea's only major ally, and its economic and diplomatic support have been important to shoring up its otherwise isolated neighbour, whose leader Kim Jong-il visited China twice this year to strengthen ties.
But those ties have become a sore-point with Washington after revelations that North Korea appears to have made big steps towards enriching uranium. Stephen Bosworth, a US envoy, arrived in Beijing on Tuesday to talk about the issue.