South Korean news agency Yonhap reports that the flag of North Korea was fired on during joint U.S.-South Korean military drills in the region.
An unnamed spokesman from the North Korean Foreign Minister was quoted by the official Korean Central News Agency as saying Pyongyang would increase its nuclear deterrent as a response to U.S. policies in the region.
"It is an extremely grave military action and politically motivated provocation to fire live bullets and shells at the flag of a sovereign state without a declaration of war," the spokesman said.
The White House last week announced it was extending a national security emergency because of "the existence and risk of proliferation of weapons-usable fissile material on the Korean Peninsula and the actions and policies of the government of North Korea."
Tensions in the Korean Peninsula are elevated following the April attempt by North Korea to deploy a long-range rocket. The launch negated a deal for food assistance from the United States.
Similar launches in 2006 and 2009 coincided with nuclear tests by the North Koreans.