A South Korean naval ship fired warning shots Tuesday after three North Korean patrol boats crossed the sea boundary.
On Wednesday the North's military accused South Korea of "an intentional grave provocation" at a time when North Korean vessels had been chasing Chinese boats fishing illegally in the area.
In future South Korean naval vessels near the border would be the target of "precision" strikes without warning if they were involved in "any trifling provocations", it said in a statement on the official KCNA news agency.
"We are willing to go for a showdown right now if the puppet rogue is desperate to stand face-to-face with us," it said.
It is not uncommon for North Korean patrol boats and fishing boats to cross the sea border into the South.
Two North Korean patrol boats violated the sea border last month, just before US President Barack Obama arrived in Seoul for a two-day visit.
The North does not recognize the Yellow Sea border, the scene of brief but bloody naval clashes in 1999, 2002 and 2009.
In March the North fired hundreds of shells in a live exercise near the sea boundary. About 100 shells dropped into South Korean territorial waters, and the South responded with volleys of shells into North Korean waters.
NJF/NJF