North and South Korea traded hundreds of rounds of live artillery fire across their disputed Yellow Sea boundary today.
It forced South Korean islanders to take shelter the day after the North raised tensions by threatening a new nuclear test.
The South said it had fired more than 300 shells in response to the North firing more than 500 shells during its three-hour military exercise.
About 100 shells fired by the North had landed in South Korean waters next to the disputed border, said Kim Min-seok, the South's Defence Ministry spokesman.
However, none of the shells had hit any land or military installation and there was no indication that either side had fired at any particular target.
When the shelling started, the South scrambled its F-15 fighters to patrol its side of the border. Residents of five nearby South Korean islands were evacuated into shelters.
Kim said the North's exercise was a “premeditated provocation and an attempt to test our military’s determination” to protect the maritime boundary.
“If the North takes issue with our legitimate returning of fire, and uses it to make yet another provocation towards our sea and islands, we will make a resolute retaliation.”
North Korea's live fire exercise began at 12.15 pm and the South began responding with its own volley of artillery shells within 30 minutes. The North's military exercise finished at about 3.30pm.
On the South Korea-controlled Baengnyeong and Yeonpyeong islands, close to the sea boundary, officials said residents had been taken to shelters as a precaution. At least 3,000 residents of Baengnyeong island moved into shelters. But by 4.30pm, the evacuation order for both islands had been lifted.
Today's exchange of fire came after Pyongyang had made the unusual announcement that it would conduct drills in seven areas north of the poorly marked boundary. The move was seen as a sign of North Korea's frustration after making little progress in its recent push to win outside aid.
North Korea also accused the South of "gangster-like" behaviour at the weekend by "abducting" one of its fishing boats and threatened to retaliate. The South said it had sent the boat back after it had drifted into its waters.
Only yesterday, Pyongyang had also threatened to conduct a "new form" of nuclear test, although Seoul said it was not imminent.
Kim Jong-un's government "is fully ready for next-stage steps, which the enemy can hardly imagine", North Korea's foreign ministry said in a statement yesterday. "[We] will not rule out a new form of a nuclear test aimed at strengthening our nuclear deterrence."
In recent weeks the North has increased its threatening rhetoric and has conducted a series of rocket and ballistic missile launches. Before today's drills, North Korea had fired at least 86 rockets since February 27, including ballistic missiles, which are banned under United Nations resolutions.
The country's foreign ministry defended the missile firings as acts of protest against the annual, continuing springtime joint military exercises carried out by South Korea and the United States. The current drill, called Foal Eagle, ends on April 18. The North has described the exercises as a rehearsal for invasion, but the allies claim they are only routine and defensive.
Experts said today's North Korean military exercise appeared to be yet more sabre rattling from Pyongyang, rather than a prelude to a sharp rise in tensions.
Daniel Pinkston, of the International Crisis Group, said: "It’s up to the two militaries either to recognise or reject their own claimed line, and challenge the other’s - this goes back and forth, so this is probably another episode of that."
The Northern Limit Line, a boundary in the Yellow Sea that wraps itself round a part of the North’s coastline, has been the scene of frequent clashes.
In November 2010, North Korea shelled Yeonpyeong island, killing four people, which triggered concerns of a full-scale conflict. It came seven months after the torpedoing of South Korea’s Cheonan warship, which killed 46 sailors. An international panel blamed the sinking on North Korea, but Pyongyang denied the charge.
The line was drawn up at the end of the 1950-53 Korean War, but North Korea does not recognise it. The two sides are still technically at war as the conflict ended in a mere truce, not a treaty.
Yesterday's statement about the "new form" of nuclear test, released through the official Korean Central News Agency, did not say exactly what kind of test was being considered.
North Korea has conducted three underground atomic tests since 2006.
The warning marks the clearest signal in months the North remains open to conducting its fourth test after detonating an atomic device in February last year. The US maintains it will not rejoin six-party nuclear talks unless North Korea shows clear signs that it is rolling back its atomic ambitions.
"The North probably won't immediately conduct a nuclear test," said Koh Yu-hwan, a professor of North Korean studies at Dongguk University in Seoul. "It is putting pressure on the US not to further delay negotiations or expand sanctions."
Last Wednesday, Pyongyang raised tensions by test-firing two medium-range ballistic missiles capable of striking Japan, sparking condemnation from the United Nations Security Council.
These tests - believed to be the first medium-range missile launch since 2009 - coincided with a summit attended by the South, the US and Japan aimed at uniting the three nations against Pyongyang's nuclear threat.
The Security Council said the North's missile launch violated UN resolutions barring Pyongyang from nuclear or ballistic activity, and agreed to consult on an "appropriate response". Pyongyang dismissed the council's criticism as "absolutely intolerable", defending the launch as a "self-defensive" act in protest against the Seoul-Washington drills being held in South Korea.
North Korea's warning came even as South Korean President Park Geun-hye proposed building closer links with the North to spur reunification in a speech last Friday, and after the two nations last month held the first reunions in three years of families separated by the Korean war.
The North rejected the South's offer earlier this month to make family reunions regular.
North Korea confirmed last Thursday that it had restarted its main nuclear reactor. In August, the Washington-based Institute for Science and International Security said that the North might have doubled the size of its uranium-enrichment facility at Yongbyon, citing satellite images.
"North Korea is implying in the foreign ministry statement it is seeing progress in enriching uranium at a high level," Koh said.
South Korea saw no signs of an imminent nuclear test in the North following the two ballistic-missile launches last Wednesday, defence spokesman Kim said at the time.
Bloomberg, Agence France-Presse, Associated Press