Tens of thousands of South Korean and US troops began a military exercise simulating an all-out North Korean attack Monday, as Pyongyang threatened a pre-emptive strike on forces participating in the drill.
The two-week annual Ulchi Freedom exercise is largely computer-simulated, but still involves 50,000 Korean and 30,000 US soldiers.
The drill always triggers a spike in tensions on the divided Korean peninsula.
This year, it coincides with particularly volatile cross-border relations following a series of high-profile defections.
On Sunday, the Unification Ministry in Seoul urged all citizens to be on guard against "North Korean terror threats" and warned of possible assassination attempts on defectors and anti-Pyongyang activists in the South.
Ulchi Freedom plays out a full-scale invasion scenario by nuclear-armed North Korea and both Seoul and Washington insist it remains purely defensive in nature.
Pyongyang views the drill as willfully provocative and the Korean People's Army (KPA) issued a statement Monday morning, threatening a military response to what it described as a rehearsal for a surprise nuclear attack and invasion of the North.
North Korea's frontline units were "fully ready to mount a preemptive retaliatory strike at all enemy attack groups involved," said a spokesman for the KPA General Staff.
The slightest violation of North Korea's territorial sovereignty during the military drill would result in the source of the provocation being turned "into a heap of ashes through Korean-style preemptive nuclear strike," the spokesman said.
Pyongyang has made similar threats in the past, but analysts say, the risk of an unintended incident escalating into a military clash is higher this year given the lack of direct communication between the two Koreas.
As tensions rose in the wake of North Korea's fourth nuclear test in January, Pyongyang shut down the two existing hotlines with South Korea -- one used by the military and one for government-to-government communications.
And last month, it severed its only direct communications link with the United States when it shut down the so-called "New York channel" which had previously served as a key point of contact between North Korean and US diplomats at the United Nations.
The January nuclear test heightened North Korea's isolation as the international community, backed by the North's main diplomatic protector China, imposed substantially upgraded economic sanctions.
Pyongyang has remained defiant, and there are concerns that the leadership might choose to lash out as its anger levels reach new peaks over a spate of headline-grabbing defections.
Last week, North Korea's deputy ambassador to Britain, Thae Yong-Ho, defected to the South -- a rare and damaging loss of diplomatic face for Pyongyang and a major PR victory for Seoul.
The North's official KCNA news agency described Thae as "human scum" and said he had fled to avoid criminal charges including embezzling funds and raping a minor.
Thae's move added to Pyongyang's fury with the defection in April of a dozen North Korean overseas restaurant workers, who it insists were kidnapped by South Korean intelligence.