North Korea has warned South Korea it might scrap their joint-venture industrial zone if Seoul links the project to sanctions over the North's rocket launch in December, a report said Thursday.
The Kaesong Industrial Complex, on the North Korean side of the border, is the flagship economic link between the two Koreas.
It hosts more than 120 South Korean companies which employ 53,000 North Koreans producing labour-intensive products such as garments, footwear and kitchen utensils.
Having started production in late 2004, the symbol of reconciliation has remained largely immune to the fluctuations of inter-Korean ties including the 2010 shelling of a South Korean island.
But the North reacted sharply after Seoul's Unification Ministry said Monday it would tighten inspection of industrial parts and materials going to Kaesong to reflect the latest UN Security Council sanctions on Pyongyang.
"If anyone touches Kaesong, even to the slightest degree and in whatever form, we would take it as a vicious sanction against us," a spokesman for the North's National Economic Cooperation Committee said in a statement.
"We would withdraw all our favors for Kaesong and turn the area back into a military zone," he was quoted as saying by Pyongyang's official Korean Central News Agency.
The spokesman stressed that the North had sacrificed a frontline border area with a high military value to make room for the complex.
The two Koreas remain technically at war, since the 1950-53 Korean War ended with an armistice, not a peace treaty.
"We have no intention of putting a damper on Kaesong or creating obstacles to its operations," a spokeswoman for the South's Unification Ministry insisted Thursday.
Pyongyang launched a long-range rocket carrying a satellite in December, sparking international condemnation and further sanctions over what was widely seen as a disguised ballistic missile test.
In response to the sanctions, the North has threatened to conduct a nuclear test which is expected to happen over the next few days.