North Korea threatened on Saturday to respond with nuclear weapons to a major US-South Korean naval exercise starting this weekend, saying it was ready for a "retaliatory sacred war".

The threat came from the powerful National Defence Commission (NDC), chaired by leader Kim Jong-Il, as tensions grew over the sinking of a South Korean warship which Seoul and Washington blame on Pyongyang.

The North routinely threatens war in response to joint military exercises by the two long-time allies, calling them a rehearsal for war.

But tensions have been high for the past two months, since the US and South Korea accused the North of torpedoing the warship with the loss of 46 lives.

The North denies involvement and says the "smear campaign" is a pretext for aggression.

The United States and South Korea have announced four-day joint exercises beginning on Sunday -- the first in a series -- in what they say is a bid to deter North Korea's "aggressive" behaviour.

"All these war manoeuvres are nothing but outright provocations aimed to stifle the Democratic People's Republic of Korea by force of arms to all intents and purposes," the NDC said in a statement on Pyongyang's official news agency.

"The army and people of the DPRK will legitimately counter with their powerful nuclear deterrence the largest-ever nuclear war exercises to be staged by the US and the South Korean puppet forces."

The exercise "is as reckless an act as waking up a sleeping tiger", it said.

The North's people and army would "start a retaliatory sacred war of their own style based on nuclear deterrent any time necessary" to counter the US and South Korea, which were pushing the situation to the brink of war, it said.

In response to the warnings, the US administration called on North Korea to tone down its "provocative" statements.

"We are not interested in a war of words with North Korea," State Department spokesman Philip Crowley said in Washington. "What we need from North Korea is fewer provocative words and more constructive action."

Crowley told AFP the North's comments were "irresponsible and precisely why we are committed to denuclearisation of the Korean peninsula."

US Defense Secretary Robert Gates warned in Seoul Wednesday of possible further "provocations" following the warship attack as a succession process gets under way in the North.

Ailing leader Kim Jong-Il, 68, is widely reported to be preparing to name his youngest son as eventual successor.

South Korea's military said it was closely monitoring the North's military moves in border areas but had not detected any unusual activities.

In a show of force, Seoul and Washington announced the exercise involving 200 aircraft, 8,000 service personnel and 20 ships including an aircraft carrier in the Sea of Japan.

And US Secretary of State Hillary Clinton disclosed plans for new sanctions on the impoverished communist state to punish it for the sinking and force it to scrap its nuclear weapons programme.

The North staged atomic weapons tests in 2006. It carried out another test in May last year, a month after quitting six-party nuclear disarmament talks.

In a separate statement, Pyongyang's foreign ministry vowed "strong physical measures" against the sanctions and pledged to strengthen its nuclear deterrent.

The comments came after the North on Friday threatened a "physical response" to the drills while the United States accused it of waging a campaign of provocation.

The war of words dominated an Asia-Pacific security forum in Hanoi attended by Clinton and North Korean Foreign Minister Pak Ui-Chun on Friday.

In Hanoi on Saturday, South Korea's Foreign Minister Yu Myung-Hwan called for stern measures against the North.

"For the time being, the international community should take stern measures in the face of North Korean provocations and make the North realise its armed provocations will face consequences," Yonhap news agency quoted him as saying.

Foreign ministers from the 27-member ASEAN Regional Forum (ARF), in a statement issued late Saturday, "expressed deep concern" over the sinking and support for a July 9 UN Security Council statement on the incident.