Senior officials from South Korea are reportedly meeting North Korean officials at Panmunjom Truce village this morning in an attempt to avoid more conflict.
The talks are between South Korean national security director, Kim Kwan-jin, unification minister Hong Yong-pyo and North Koreans Hwang Pyong So, the top political officer for the Korean People's Army, and Kim Yang Gon, a senior North Korean official responsible for South Korean affairs.
They are the first high-level discussions between the two sides in almost a year.
North Korea's military are under orders to be "fully ready" for war, according to a South Korean news agency.
Kim Jong-Un declared a "quasi-state of war" after convening an emergency meeting of the communist country's military leaders, Yonhap reported North Korean TV as saying.
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The movement of vehicles in North Korea carrying short range Scud and medium-range Rodong missiles has been detected by US and South Korean surveillance, according to the same agency.
A military official said a meeting of senior party and defence officials led by the North Korean leader "reviewed and approved the final attack operation".
Propaganda vans with loudspeakers have also been mobilised in Pyongyang to broadcast the news that the country is on a war footing.
In the South, the military is on its highest state of alert.
The North earlier threatened military action if the South did not stop pumping propaganda into the North across the border using loudspeakers by 5pm on Saturday Pyongyang time (9.30am in the UK). But this deadline has passed without any reported incidents.
Anti-Pyongyang statements have been broadcast across the frontier recently and the North responded by firing a shell on Thursday, believed to have been aimed at one of the loudspeakers.
The projectile landed in an area of the demilitarised zone (DMZ) around 35 miles (60km) north of Seoul.
In response, South Korea fired tens of 155mm artillery rounds at the location where the shell came from, the country's defence ministry said.
There were no reports of any injuries.
North Korea denied provoking the exchange of fire, accusing Seoul of using what it called a "nonexistent pretext".
North Korean Central Television said: "Commanders of the Korean People's Army were hastily dispatched to the front-line troops to command military operations to destroy psychological warfare tools if the enemy does not stop the propaganda broadcast within 48 hours and prepare against the enemy's possible counteractions."
South Korea says it has tried to send a message calling on the North to apologise for the recent artillery fire and to punish those responsible.
But the country's Unification Ministry said North Korea has refused to receive the message.
The United States has expressed concern about the situation, urging North Korea to stop threatening regional security and the UN said it was following tensions "with serious concern".
About 28,500 American troops are stationed in South Korea, with the US having retained bases following the end of the Korean War in 1953.
The three-year conflict was ended by a ceasefire, rather than a peace treaty, meaning both countries technically remain at war.