South Korean President Lee Myung-Bak has called for new six-party talks with North Korea.
Mr Lee said there was no choice but to try to dismantle North Korea's nuclear programme through diplomacy.
His comments follow a year of high tension, including exchanges of fire between North and South.
The talks format involves the two Koreas, China, Russia, Japan and the US, and had offered rewards to the North for ending its nuclear programme.
South Korea, the United States and Japan had previously said six-party talks could not resume until the North showed serious intent to change.
"(We) have no choice but to resolve the problem of dismantling North Korea's nuclear programme diplomatically through the six-party talks," said Mr Lee.
He was speaking after receiving the annual report from his foreign ministry.
Mr Lee said time was short for the international community to make progress on ending the North's nuclear threat because North Korea has set 2012 as its deadline to become a "great, powerful and prosperous" nation.
The comments appear to mark a shift away from the hard-line he had taken after North Korea was accused of torpedoing a South Korean warship, the Cheonan, on 26 March.
That incident left 46 South Korean sailors dead.
On 23 November, North Korea shelled the South Korean island of Yeonbyeong, killing four South Koreans, including civilians.
North Korea and its ally China, meanwhile, expressed anger at huge military drills mounted by the South with its main ally the United States.
South Korean reports say that North Korea has also dramatically stepped up its military drills in the past year.
Western allies of South Korea were angered by revelations this year about the existence of another nuclear enrichment plant in North Korea.
The North has again defended this, saying it was for the production of civilian power sources only and would not have been necessary if the US had kept to earlier promises to supply such facilities.
The six-party negotiations led to the closure of a plutonium-producing reactor in 2007, but collapsed in April 2009 amid mutual recriminations, after which the North set off further nuclear tests.
Mr Lee Myung-bak also told his nation earlier this week that it must unite in the face of military aggression from the North.
On Sunday, it was announced that South Korean and Chinese defence ministers would meet in Beijing in February for talks on the situation.