North Korea is withdrawing all its workers from the joint-Korean Kaesong industrial zone and suspending operations there.
Kaesong, which is just over the border in the North, was established almost a decade ago.
It has 53,000 North Korean employees, but is funded and managed by South Korean firms.
The zone has been a symbol of co-operation between the two Koreas, but a North Korean official said it could now be closed permanently.
The KCNA news agency quoted Central Committee secretary as saying the North would now "temporarily suspend the operations in the zone and examine the issue of whether it will allow its existence or close it".
"How the situation will develop in the days ahead will entirely depend on the attitude of the South Korean authorities," Mr Kim said.
Russia and China have called for calm and a return to dialogue.
Russian President Vladimir Putin said that as a neighbour of North Korea his country was "worried about the escalation" of tensions.
He said in Germany there was a risk of a conflict on the Korean peninsula which would make the Chernobyl nuclear disaster "seem like a child's fairy tale".
The United Nations imposed tough sanctions on North Korea last month following its third nuclear test.
Pyongyang has responded by issuing almost daily threats to use nuclear weapons and saying it would restart its nuclear reactor.
The North has also shut down an emergency military hotline between Seoul and Pyongyang.
Last week it warned it would not be able to guarantee the safety of foreign embassy staff after 10 April, and that countries should begin evacuating their diplomatic staff.
A BBC correspondent in Seoul said state media in North Korea have been broadcasting a continuing diet of war and retribution. Programmes about biochemical war, nuclear war and military preparations dominate the listing.
