North Korea says it is scrapping all non-aggression pacts with South Korea, closing its hotline with Seoul and shutting their shared border point.
The announcement follows a fresh round of UN sanctions punishing Pyongyang for its nuclear test last month.
Earlier, Pyongyang said it had a right to carry out a pre-emptive nuclear strike and was pulling out of the armistice that ended the Korean War.
The US said "extreme rhetoric" was not unusual for Pyongyang.
China, which is the North's only major ally, called for both North and South to show restraint and to continue talking.
Beijing rarely criticises its ally, but has criticised the North's nuclear tests and has given support to the UN's sanctions.
South Korea's President Park Geun-hye said the current security situation was "very grave" but that she would "deal strongly" with provocation from the North.
She also said she was ready to talk to Pyongyang if it "comes out on the path toward change".'Puppet traitors'
The North Korean announcement, carried on the KCNA state news agency, said the North was cancelling all non-aggression pacts with the South and closing the main Panmunjom border crossing inside the Demilitarized Zone.
The threatened pre-emptive nuclear strike seems more bluff than reality, since the North's leaders know it would be suicidal, and an attack on the US seems impracticable given the still technically rudimentary quality of the North's ballistic missile programme and the unproven state of its nuclear miniaturisation technology needed to place a nuclear warhead atop a missile.
A more troubling possibility is that the North might choose - out of irritation with the UN - to precipitate a border clash with South Korea, either on land or sea, as it did before in 2010.
The two Koreas have reached a range of agreements over the years, including a 1991 pact on resolving disputes and avoiding military clashes, but the North Korean statement did not expand on what was being cancelled.
It also said it was notifying the South that it was "immediately" cutting off the North-South hotline, saying there was "nothing to talk to the puppet group of traitors about".
The hotline, installed in 1971, is intended as a means of direct communication at a time of high tension, but is also used to co-ordinate the passage of people and goods through the heavily-fortified Demilitarized Zone.
North Korean leader Kim Jong-un also visited front-line military units that were involved in the shelling of a South Korean island in 2010, KCNA reports.
The reports said he had urged soldiers to keep themselves ready to "annihilate the enemy" at any time.
The BBC's Lucy Williamson in Seoul says it appears the North is trying to build a sense of crisis domestically, with a large rally staged in Pyongyang on Friday and reports of camouflage netting on public transport.
North Korea has breached agreements before and withdrawing from them does not necessarily mean war, our correspondent says, but it does signal a more unpredictable and unstable situation.
Shutting down the hotline will leave both more exposed to misunderstandings, she adds.'Punishment mode'
Seoul's defence ministry spokesman Kim Min-seok said that if the North were to carry out a nuclear attack on South Korea it would become "extinct from the Earth by the will of mankind".
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Strongly condemns North Korea's ongoing nuclear activities, including its uranium enrichment programme
Imposes new sanctions to block financial transactions and bulk cash transfers in support of illicit activity
Strengthens states' authority to inspect suspicious cargo
Requires states to deny port access to any North Korean vessel that refuses to be inspected
Calls on states to deny permission to any aircraft to take off, land in or overfly their territory if the aircraft is suspected of transporting prohibited items
Enables stronger enforcement of existing sanctions by UN member states
Sanctions new individuals and entities
He also warned that in response to any provocation from the North, Seoul would "immediately" turn the US-South Korean military drills currently being conducted "into a punishment mode to respond to it as planned".
The US, the main focus of North Korean ire, said it was capable of protecting itself and its allies from any attacks.
"One has to take what any government says seriously," state department spokeswoman Victoria Nuland said of the nuclear threat.
"It is for that reason that I repeat here that we are fully capable of defending the United States. But I would also say that this kind of extreme rhetoric has not been unusual for this regime, unfortunately."
The North Korean declaration came after the UN Security Council in New York unanimously backed Resolution 2094, imposing the fourth set of sanctions.
The resolution targets North Korean diplomats, cash transfers and access to luxury goods.
It imposes asset freezes and travel bans on three individuals and two firms linked to North Korea's military.
South Korea's ambassador to the UN, Kim Sook, said it was time for North Korea to "wake up from its delusion" of becoming a nuclear state.
"It can either take the right path toward a bright future and prosperity, or it can take a bad road toward further and deeper isolation and eventual self-destruction," he said.
US ambassador to the UN Susan Rice said the sanctions would "further constrain" North Korea's ability to develop its nuclear programme.
She warned that the UN would "take further significant actions" if Pyongyang were to carry out another nuclear test.