North Korea blew up and destroyed an inter-Korean liaison office in its border city of Kaesong on Tuesday.
South Korean media reported that an explosion was heard and smoke could be seen over Kaesong, and the South's Unification Ministry said the liaison office had been destroyed.
It comes after the North ramped up its threats to the South saying its army was ready to enter the demilitarized zone.
In state media earlier on Tuesday Pyongyang said it was ready to take action if groups of North Korean defectors continue to send propaganda and food over the border from the South.
The Korean People's Army (KPA) was quoted saying it has been studying an "action plan" to reenter zones that had been demilitarised since the 1950s and quote "turn the front line into a fortress."
The escalation followed a warning made in a statement on Saturday by Kim Yo Jong -- Kim Jong Un's younger sister -- for the military to make preparations for an unspecified next action.
The inter-Korean liaison office was established in 2018.
as part of a series of projects aimed at reducing tensions between the two Koreas.
The office has been closed since January over coronavirus fears.
Several defector-led groups have regularly sent back flyers, together with food, $1 bills, and USB sticks containing South Korean dramas and news,
- critical of leader Kim Jong Un including human rights abuses.
Usually, they're flown over the border by balloon or sent in bottles by sea.
Seoul has tried to stop the groups in the past - and last week, vowed to take legal action against the groups.
It argues their actions fuel tensions between the two sides, pose risks to those living near the border and cause environmental damage.
Meanwhile, the South's President Moon Jae-in has urged Pyongyang to keep to peace agreements he reached with Kim in 2018 and return to dialogue.
Last week Pyongyang severed inter-Korean hotlines and threatened to close a liaison office between the two governments.
The defector-led groups had earlier said they will push ahead with their campaign this week.