North Korea stepped up pressure on Seoul by delaying access to a joint industrial park in a move that could trap hundreds of South Korean workers on the northern side of the world's most militarised border.
It was not immediately clear if the move was aimed at closing the Kaesong Industrial zone, which generates $2 billion a year in trade for the impoverished North and $80 million in cash wages that go straight to its government. North Korean delays to accessing the zone are very rare.
The delay came after Pyongyang said it would restart a nuclear reactor that it uses to produce plutonium for its nuclear weapons programme and as Washington deployed military resources in South Korea amid growing tensions with the North.
As of 0054 GMT, 861 South Korean workers were in the zone that is home to 123 South Korean firms just inside North Korea. They employ more than 50,000 North Koreans to make low grade household goods.
The complex was established as a form of joint-Korean cooperation in the early 2000s.
"We are waiting for access from the North Korean authorities," a Unification Ministry official said. The ministry said 179 workers were also awaiting entry at the border.
For over a month North Korea has been threatening the United States with a nuclear attack and to bomb its Pacific bases as well as saying it will wage war on South Korea.
The moves are in response to what Pyongyang says are "hostile" military drills between the United States and South Korea and new sanctions imposed on the isolated country for its third nuclear test, staged in February.
The South Korean won was trading at a six and a half-month low in early domestic trade due to the escalation in tensions.
North Korea's young leader Kim Jong-un, aged 30, has ratcheted up tensions since he took office in December 2011 by also staging two long-range rocket launches in defiance of U.N. sanctions.
His actions pose a major challenge to new South Korean President Park Geun-hye who took office just a week after the North's Feb. 12 nuclear test.
South Korea insists it has a contingency plan for dealing with any hostage situation in Kaesong, but officials refused to disclose what it would do in the event North Korea chose to prevent its citizens from returning home.
Most observers believe North Korea will stick to threats and that much of its hostile rhetoric is designed for internal consumption to solidify the young Kim's rule.
Earlier this week Kim appointed key allies to top posts and cemented the power of his uncle Jang Song-thaek and aunt Kim Kyeong-hee by naming one of their close associates as prime minister.
U.N. Secretary-General Ban Ki-moon said the crisis over North Korea had gone too far and he appealed for dialogue.
"Nuclear threats are not a game. Aggressive rhetoric and military posturing only result in counter-actions, and fuel fear and instability," Ban, a South Korean, told a news conference during a visit to Andorra.
The Pentagon, meanwhile, said another U.S. guided-missile destroyer had taken up position in the western Pacific to assist with missile defense.
The Unification Ministry said 446 workers were due to cross back to South Korea on Wednesday but said they had not yet been given permission to do so.