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Minister Kim Yong Chun repeated Pyongyang's charge that the South had been preparing to start a war by conducting live-fire drills off the west coast, speaking at a rally to mark leader Kim Jong Il's rise to the country's top military post 19 years ago.
He was quoted by North Korea's KCNA news agency which regularly threatens the South, but which had up to now been relatively restrained in its criticism of the military drills.
"To counter the enemy's intentional drive to push the situation to the brink of war, our revolutionary forces are making preparations to begin a holy war at any moment necessary based on nuclear deterrent," KCNA quoted Kim as telling the rally in Pyongyang.
His remarks came shortly after South Korean fighter jets dropped bombs and tanks fired artillery in the South's largest air and ground firing drills of the year.
It was a show of force staged a month after North Korea's deadly shelling of a front-line island.
Hills erupt in smoke
Tanks raced down mountain roads firing artillery rounds. The boom of cannons echoed through the valley and the hills erupted in smoke.
Rockets streamed across the valley and slammed into the side of a hill as helicopters overhead fired rockets at targets and F-15 fighters zoomed by dropping bombs.
Image: F-15K fighter jets drop bombs during military exercises
Wally Santana / AP
Two F-15K fighter jets drop bombs during military exercises on Thursday in Pocheon, South Korea.
The drills, which lasted about 40 minutes, were the armed forces' largest joint firing exercises this year, and the biggest-ever wintertime air and ground firing exercises, government and army officials said on condition of anonymity, citing department rules.
Forty-seven similar exercises have taken place this year but Thursday's maneuvers were scheduled in response to the North Korean attack, according to army officials.
Exactly one month ago, routine South Korean live-fire drills from Yeonpyeong Island in the Yellow Sea triggered a shower of North Korean artillery that killed two marines and two construction workers.
It was the first military attack on a civilian area since the 1950-53 Korean War ended in a truce.
North Korea, which claims the waters around the South Korean-held island lying just 7 miles from its shores as its territory, accused the South of sparking the exchange by ignoring Pyongyang's warnings against staging the live-fire drills near their disputed maritime border.
Amid international concerns of all-out war on the tense Korean peninsula, South Korea has pushed ahead with military exercises over the past several weeks, including live-fire drills from Yeonpyeong Island and Thursday's exercises.
"We will thoroughly punish the enemy if it provokes us again as with the shelling of Yeonpyeong Island," Brig. Gen. Ju Eun-sik, chief of the South Korean army's 1st Armored Brigade, said in a statement Wednesday.
The two Koreas remain technically at war because their 1950s conflict ended in a cease-fire, not a peace treaty.
In a rare trip to the front line, South Korean President Lee Myung-bak visited a military unit near the border to inspect defensive readiness against Pyongyang.
"We had believed patience would ensure peace on this land, but that was not the case," Lee told troops.
Lee has replaced his top defense officials with more hawkish military men, a response to criticism of a perceived weak response to hostile acts from the North. .
The military tension over the past month has been the worst in more than a decade, and comes on the heels of the March sinking of a South Korean warship that Seoul blames on Pyongyang, but which North Korea denies attacking. Forty-six sailors died in that incident.
South Korea's navy also was conducting annual anti-submarine exercises off the east coast.
In Pocheon, dozens of soldiers and civilians, including schoolchildren in bright yellow jackets, watched the drills.
"We are facing a crisis because of North Korea, so I came to see this air and ground operation. I want to feel and see the level of South Korea's armed forces," said Kim Tae-dong, 70. "Another North Korean provocation will happen. We should prepare our military perfectly for that."
China, the impoverished North's only major ally, has urged dialogue to resolve the crisis and has been reluctant lay to blame, frustrating Washington and its allies which want Beijing to do more to rein in Pyongyang.
Barack Obama is expected to press this point when Chinese President Hu Jintao visits the United States on January 19 .