The military heads at their biannual meeting took stock of the current security situation after South Korean intelligence reports said Jang Song Thaek, 67, the powerful uncle of North Korean leader Kim Jong Un, had been removed from his position as vice chairman of the North's top military body, Yonhap News said.
Separately, CNN quoted two South Korean lawmakers who had been briefed by the intelligence agency as saying in the latest development, Jang's two close allies had also been publicly executed. CNN, however, said it could not independently confirm the report.
About 140 South Korean military commanders at their meeting hosted by Defense Minister Kim Kwan-jin also assessed their preparedness in light of the North Korean situation, Yonhap reported.
The South Korean defense minister said two years after North Korean leader Kim Jong Un took over following the death of his father Kim Jong Il in December 2011, work is currently underway to reorganize the power structure within the inner circle in North Korea.
"Under this circumstance, North Korea is stepping up military capabilities across the nation," the minister was quoted as saying. "The commanders' meeting this year is especially significant."
A senior South Korean military official told Yonhap Jang Song Thaek's removal could make Kim Jong Un even more powerful but could increase the instability within the regime.
"In light of the recent change, calls are rising that (the South Korean military) should prepare not only for provocations but also for an all-out battle," the official said.
The South has been carefully monitoring the situation in the North ever since the North conducted its missile tests last year followed by its third nuclear test in February. Yonhap said the military commanders pledged to speed up the establishment of an independent air and missile defense and a pre-emptive missile destruction system by upgrading current facilities.
Jang Sung Thaek is the brother-in-law of the late North Korea leader Kim Jong Il.
Analysts told CNN Jang's removal would mark a major upheaval in North Korea's leadership since Kim Jong Un succeeded his father.
"Some see this as perhaps the last part of the power consolidation phase, that Kim Jong Un has in fact removed all of the old guard close to his father and is now finalizing the inserting of his own inner group," John Park, a Northeast Asia analyst at Harvard's Kennedy School of Government, told CNN.
Park also said China, the isolated country's main ally, considered Jang as a force of stability, adding there will be "a lot of concern in Beijing right now."
CNN cited earlier Time magazine reports that the late Kim Il Sung, grandfather of the current leader and known as founder of North Korea, had disapproved of Jang's marriage into the family.