North Korea fired more than 200 artillery rounds into the sea near the maritime border with South Korea.
A military official said the firing took place on Friday, when residents of two South Korean islands were ordered to seek shelter due to an unspecified "situation."
The defence ministry would not confirm if the order was prompted by the North's actions or South Korean drills in response.
However, a text message sent to residents and confirmed by an island official cited "naval fire" to be conducted by South Korean troops from 3pm local time (6am UK time) on Friday.
An official on Yeonpyeong island, which sits just south of the disputed Northern Limit Line (NLL) sea border, said the evacuation was ordered for residents to move into bomb shelters on the island at the request of the South Korean military.
The firing by North Korea caused no civilian or military damage in the South, South Korea's military said in a news briefing.
But is being seen as "an act of provocation that escalates tension and threatens peace on the Korean peninsula," a spokesman for the South Korean Joint Chiefs of Staff said.
The North Korean artillery shells all landed on the northern side of the sea border, he said, adding the South Korean military has been monitoring the North's moves along its shores with the cooperation of the US military.
He warned the South will take "corresponding measures" in response to the North's actions.
South Korea's military told the village there was firing at sea by the South Korean military after "a situation" near the border, the official said. But it was not clear whether it was a drill or had some other cause.
Yeonpyeong is home to just over 2,000 residents and troops stationed there, about 75 miles west of Seoul and accessed by ferries taking more than two-and-a-half hours.
Leif-Eric Easley, professor of international studies at Ewha University in Seoul, said it was not unusual for North Korea to fire artillery in the area as part of its winter drills.
"What's different this year is ... Kim Jong-un has publicly disavowed reconciliation and unification with the South," he said.
In remarks to a year-end party meeting last week, the North Korean leader said unification with the South was not possible and Pyongyang was fundamentally changing its policy towards the South, which it now sees as an enemy state.
The waters near the disputed NLL have been the site of several deadly clashes between the North and South Korea including battles involving warships and the sinking of a South Korean navy corvette in 2010 by what is believed to be a North Korean torpedo, killing 46 sailors.
In November 2010, North Korean artillery fired several dozen rounds at Yeonpyeong island, killing two soldiers and two civilians, in one of the heaviest attacks on its neighbour since the Korean War ended in 1953.
North Korea said at the time it was provoked into taking action by South Korean live-fire drills that dropped shells into its territorial waters.
Drawn up at the end of the Korean War as an unofficial border, Pyongyang did not dispute the NLL until in the 1970s, when it began violating the line and arguing for a border further to the south.
North Korea has warned in recent days that the situation on the Korean peninsula is spiralling towards war because of dangerous moves by the US and South Korean militaries.
Both Koreas have vowed crushing military responses if attacked.
