Seoul Friday accused North Korea of a "blatant lie" in claiming it had not fired shells near a South Korean warship and said Pyongyang had threatened to bombard its military vessels.

The North's military earlier Friday had rejected as "sheer fabrication" Seoul's assertion that it fired two shells in the vicinity of a South Korean navy vessel on patrol near the disputed Yellow Sea border the previous day.

Seoul insisted the shells fell about 150 metres (yards) off the South Korean corvette, which was not damaged but responded by firing five rounds into waters near a North Korean military vessel.

"The verified fact is that the puppet navy vessel, which intruded deeply into our waters under the pretence of controlling Chinese fishing boats, fired recklessly and lied that we had fired first. This is a sheer fabrication," the North's Western Front Command said in a statement.

The command said it was "well prepared to crush ruthlessly" any provocative acts by South Korea, vowing to turn the sea border area into "tombs" for the South's military.

The South's defence ministry dismissed the North's claim as a "blatant lie".

"North Korea's such far-fetched claims are nothing but a blatant lie ... and are subject to ridicule by the international community," ministry spokesman Kim Min-Seok said.

Seoul also denounced Pyongyang for sending messages continously through an international radio channel, threatening attacks on South Korean military vessels.

South Korean President Park Geun-Hye expressed "very strong regret" and accused Pyongyang of committing a provocation at a time when South Koreans are in grief over last month's ferry sinking, the president's office said.

The build-up to the incident started Tuesday when a South Korean naval ship fired warning shots to turn back three North Korean patrol boats that crossed the maritime border.

The North then threatened Wednesday to attack South Korean warships without warning at the slightest hint of any provocative act, claiming its boats were controlling illegal Chinese fishing north of the unmarked sea border.

'bloody clashes'

The North does not recognise the sea boundary, unilaterally drawn by the US-led United Nations at the end of the Korean War.

It was the scene of brief but bloody naval clashes in 1999, 2002 and 2009.

In March the North fired hundreds of shells near the sea boundary. About 100 shells dropped into South Korean territory, and the South responded with volleys of shells into North Korean waters.

Cross-border tensions have been high for months and both sides have upped the ante in their verbal exchanges over crashed surveillance drones recently recovered in South Korea.

Seoul said a joint investigation with US analysts had provided "smoking gun" evidence that the drones came from the North. Pyongyang flatly denied any involvement.

China, the North's only major ally, urged the two Koreas to exercise restraint and maintain "peace and stability".

In a surprise announcement Friday, the North vowed to send athletes to this year's Asian Games to be hosted by South Korea's western city of Incheon, the first time it has participated in a major sporting event there for more than a decade.

Incheon welcomed the announcement saying it would help the two Koreas boost reconciliation.

Pyongyang boycotted the 1988 Olympics in Seoul but sent athletes and cheerleaders to the 2002 Asian Games in South Korea's southern port city of Busan.

"The North's announcement will play a positive role in easing cross-border tension," Yang Moo-Jin, a professor at the University of North Korean Studies in Seoul, told AFP.

"It also reflects the North's willingness to cooperate with the South on non-military matters, although Pyongyang is expected to maintain its hardline stance about security affairs," he added.