"If the aggressors ignite a war on this land, the army and people of the DPRK (North Korea) will resolutely retaliate against them with merciless deadly blows," the Korean National Peace Committee said in a statement.

North Korea will bolster its "self-defensive deterrence for defending the dignity and sovereignty of the Korean nation to cope with the provocative moves of the US and south Korean warmongers," it said.

The North has used the word "self-defensive deterrence" in referring to atomic bombs since its nuclear test last October.

The warning came as the week-long RSOI (Reception, Staging, Onward Movement and Integration) and Foal Eagle exercise began across South Korea Sunday.

The allies say the exercise is purely defensive.

But North Korea has accused Washington of carrying out the exercise while negotiations have been under way with Pyongyang as part of six-nation talks over the North's nuclear programmes.

"This saber-rattling just launched behind the curtain of 'dialogue' and 'peace' is a very rude act proving their utter lack of good faith," the committee said.

The exercise is "harmful to the settlement of the nuclear issue and peace of the Korean Peninsula and driving the situation to a phase of confrontation and war," it said.

The committee also warned the exercise would drive inter-Korean relations to collapse.

The exercise focuses on a mock battle aimed at preparing for the sudden arrival of US reinforcements, US officials said earlier. It also features anti-commando operations and computer war games.

As part of the exercise, the USS Ronald Reagan plus a cruiser and two destroyers have joined tens of thousands of US and South Korean soldiers.

Outside a sprawling US military compound in Seoul, riot police blocked a march by about 1,000 South Korean anti-war activists who chanted slogans such as "Stop war games!"

"The exercise threatens peace on the Korean peninsula as it comes amid international efforts to denuclearise the peninsula following the February 13 six-party agreement," the protesters said in a statement.

The United States has stationed tens of thousands of troops in the South since the Korean war began in June 1950 with an invasion by the North.

Currently some 29,500 US troops are stationed here to help 680,000 South Korean forces face up to North Korea's 1.1-million-strong military.