North Korea has blocked South Korean workers from entering the joint inter-Korean industrial zone in Kaesong, stepping up its pressure on Seoul.
The blockade of the complex, which houses more than 100 factories, has been confirmed by South Korea's unification ministry which said the Seoul government "deeply regrets the entry ban and urges it to be lifted immediately."
The ministry's spokesperson Kim Hyung-seok said: "Ensuring the safety of our citizens is our top priority and the South Korean government will take necessary measures based on this principle."
More than 800 South Korean workers who were already inside Kaesong have been allowed to return home from the complex, where a large number of firms are staffed by labourers from the north and managers from the south.
Reports suggest that an unfriendly atmosphere between northern and southern staff has been developing within the complex since last weekend. However, the decision to lock out all workers from South Korea has been greeted with consternation by many companies trading inside Kaesong.
"Trust between north and south will fall apart, as well as the trust we have with our buyers. We're going to end up taking the damage from this," Lee Eun-haeng, who owns an apparel firm in the complex, told Reuters.
The industrial zone is vital for North Korea's economy and has also been a pointer to relations between the two Koreas. The industrial park is the last remaining economic link between the two countries, which are technically at war.
The latest move has surprised many people who thought North Korea would not want to do anything that would affect normal functioning of the crucial industrial zone.
Cheong Seong-chang of the Seoul-based think tank Sejong Institute said: "It appears to be a temporary measure intended to raise tensions with the South, having declared it is entering a state of war and having been ridiculed for keeping Kaesong open for financial reasons.
"At least until the end of April, when [South Korean/US] drills end, the North is likely to keep up the tensions as it had done in previous years. The message is it is capable of dealing a major blow to Kaesong."
South Koreans were briefly denied access in 2009 afted Seoul and Washington conducted a joint military exercise.