The ministry said in a statement it would cut military forces from 690,000 to 650,000 by 2008. Cuts already affected 9,000 troops last year.
"The troop realignment is part of efforts to restructure the forces into a technology-oriented future military," the statement said.
It said skill levels would be raised and more high-tech equipment would be introduced.
South Korea is still technically at war with communist North Korea, which boasts the world's fifth-largest military force of 1.1 million. The 1950-1953 Korean War ended in an armistice, not a peace treaty.
The South Korean forces work alongside some 32,500 US troops stationed in South Korea to deter the North. The American force is to be scaled down to 25,000 by 2008.