The president has been trying to build closer relations with North Korea since taking office in late February. She formally proposed the peace park Thursday, Yonhap News Agency reported.
Three border cities, Paju, Cheorwon and Goseong, are being considered as potential sites for the park, a source told Yonhap.
The DMZ, which stretches 150 miles across the Korean peninsula, was put in place under the 1953 armistice that ended the fighting but did not officially end the Korean War or the animosity between the two countries.
Paju is the site of Panmunjon, the village where the armistice was signed, and the gateway to Kaesong, the joint industrial park the Koreas agreed this week to reopen. Cheorwon County, a popular birdwatching spot, is in the area where some of the war's most brutal battles were fought, while Goseong County is in an area of mountain resorts on both sides of the border.