"That may provide an excuse for Japan's nuclear armament, which in turn will cause repercussions from China and Russia and lead to a change in the overall balance of power," Vice Foreign Minister Yu Myung-Hwan told parliament.
He said any nuclear test would attract "a higher level of various counter-measures" from the UN Security Council, compared to those imposed on the North after its July missile tests.
But he said South Korea was not considering military options even if a test goes ahead. "In our countermeasures, military means are not included."
Other officials who testified at the parliamentary hearing expressed similar concerns, urging North Korea not to conduct a nuclear test.
The North said Tuesday it would be compelled to carry out a test at an unspecified date and under safe conditions, in response to what it called a "threat of nuclear war and sanctions" from the United States.
South Korea said it would not tolerate any test and urged its neighbour to return quickly and unconditionally to stalled disarmament talks.
The North has boycotted the talks since November over US financial sanctions imposed in September last year.