The annual South Korean-U.S. exercise -- called Ulchi Focus Lens up to 2007 -- runs through Aug. 26 in the Yellow Sea off the peninsula's west coast.
The exercise involves more than 80,000 troops from South Korea, the United States and the seven countries that sent forces to help the allies in the 1950-53 Korean War which ended in an armistice that divided the Korean peninsula.
North and South Korea remain technically at war.
The exercise focuses on how U.S. and South Korean forces would defend against a North Korean attack, military Web site Global Security said.
The focus is on the strategic, operational, and tactical aspects of military operations on the Korean Peninsula. The exercise also demonstrates U.S. resolve to support South Korea against external aggression while improving combat readiness and interoperability, Global Security said.
But a spokesman for the General Staff of North Korea's People's Army called the exercise a dry run for "full-dress military aggression" against the North, a report by North Korea's official news agency KCNA said.
The KCNA also carried a report and picture of a rally against the exercise in front of the Korean War Memorial Museum in Seoul.
The warning comes after a threat earlier this month that the exercise could undermine the possible restart of six-party peace talks on North Korea's nuclear weapons research.
The six countries in the talks are China, the two Koreas, Japan, the United States and Russia. The talks were shelved in 2009 when Pyongyang pulled out to protest U.N. sanctions over its nuclear tests.
South Korea has maintained there can be no talks unless the North demonstrates its denuclearization commitment and takes responsibility for the March 2010 sinking of the South Korean navy's frigate Cheonan, an incident in which 46 sailors died, as well as North Korea's shelling of Yeonpyeong Island in November that killed four people.
Hopes that the talks would soon restart were raised last month when First Vice Foreign Minister Kim Kye Gwan, involved in nuclear negotiations, visited New York. He had closed talks with U.S. officials including Stephen Bosworth, the top U.S. envoy on Korean Peninsula affairs.
Last month during a visit to South Korea, U.S. Navy Adm. Mike Mullen, chairman of the U.S. Joint Chiefs of Staff, warned North Korea may attempt more provocations against the South. The provocations could be part of a strategy to give credibility to leader Kim Jong Il's successor-in-waiting, his third son Kim Jong Un.
"A succession plan being executed has been ongoing for some time and that's not an insignificant part of the whole provocation cycle," Mullen said.