The communist country did not say when the launch would be made, but Seoul expects it will be ready in a week or two, warning that Pyongyang would face sanctions whether it is a missile or a satellite.
In a statement, the North's Korean Committee of Space Technology said "full-scale preparations are under way" to launch a rocket to put a communications satellite into orbit.
"When this satellite is successfully launched, our space technology will make a great step forward toward becoming an economically strong country," said the statement carried by Pyongyang's state-run Korean Central News Agency.
The committee said the rocket would be fired at a launch site in the county of Hwadae in the country's northeast. Hwadae County includes Musudan-ri, which is widely believed to be the launch site for the country's long-range missiles designed to carry a nuclear warhead that could hit U.S. territory.
"Outer space is an asset common to mankind, and its use for peaceful purposes has become a global trend," the committee said, stressing that North Korea has the sovereign right to send up rockets for "peaceful space development." It is the same language it used in 1998 to disguise a long-range missile test as a satellite launch.
When the North test-fired a multistage rocket named the Taepodong-1 into the Pacific Ocean over Japan in August 1998, it argued that the rocket's purpose was to send a satellite into orbit for the peaceful use of space.
A year later the North claimed the satellite, dubbed Kwangmyongsong-1, or Bright Star, was still orbiting the Earth, "transmitting the melody of the immortal revolutionary 'Song of General (North Korean founder) Kim Il Sung' and 'Song of General (his son and current leader) Kim Jong Il.'"
The North said the satellite was a "brilliant achievement based on our country's Juche (self-reliant) economy and scientific research," though the U.S. Space Command said it did not observe any object orbiting the Earth or any radio transmission that could justify Pyongyang's claim.
After the rocket launch, Kim Jong Il cemented his status as the country's new leader in October 1998, when he was formally inaugurated as head of state under the constitutional revision, succeeding his father, who died in 1994.
Tuesday's statement from the National Space Committee called the rocket the "Unha-2 that will put communications satellite Kwangmyongsong-2 into orbit."
"Preparations for launching the experimental communications satellite Kwangmyongsong-2 by means of the delivery rocket Unha-2 are now making brisk headway," it said.
The North has also employed the same explanation used by Iran to defend its missile programs, saying Pyongyang's "policy of advancing to space for peaceful purposes is a justifiable aim that fits the global trend of the times."
Iran recently launched its first homemade satellite into space, saying its space advancement serves no military purpose. But experts warn Tehran's space work could lead to the development of an intercontinental ballistic missile. As is the case with North Korea, Iran's military plays a key role in the space program.
The North's state newspaper, Rodong Sinmun, said that North Korea, as a sovereign state like Iran, has the right to send rockets into space for "peaceful space development."
"Currently our scientists and engineers, in keeping with the international trend, are actively pushing ahead with projects aimed at utilizing space for peaceful goals," it said.
But South Korea has warned the North would face stern international punishment whether the rocket is for a missile or a satellite.
Seoul's Defense Minister Lee Sang-hee said whether the North launches a satellite or a missile, South Korea will consider it a military threat because putting a satellite into orbit involves technology that is also used in advancing a long-range missile system.
"In either case, we believe it is a threatening act toward us, and we are preparing to deal with it accordingly," Lee told Parliament.
Foreign Minister Yu Myung-hwan warned that any such launch would invite U.N. sanctions because it would violate the 2006 U.N. resolution banning North Korea from pursuing missile or nuclear programs.
A rocket launch of any kind would be a violation of the U.N. Security Council resolution, Yu said. The U.N. resolution was adopted after Pyongyang launched a Taepodong-2. It failed about 40 seconds after blast-off.
Yu left for Beijing on Tuesday to call on China to use its influence with Pyongyang and ask it to refrain from its missile activities. Yu said he would "brainstorm" with his Chinese counterpart over how to deal with the North during his two-day tour.
The visit comes after U.S. Secretary of State Hillary Clinton toured South Korea, China, Japan and Indonesia last week. During her trip she warned North Korea against any "provocative and unhelpful" behavior.