North Korea has reprocessed "a small number" of its spent nuclear fuel rods, South Korea's intelligence agency said on Wednesday.
The North is thought to have stored 8,000 spent fuel rods
The reclusive communist state has also carried out about 70 tests on explosive devices linked to its nuclear programme, the agency added.
North Korea has claimed before to have begun reprocessing its 8,000 spent rods - a move which could allow it to extract enough weapons-grade plutonium to develop a handful of nuclear weapons within months of starting the reprocessing operation.
But international intelligence agencies have been unsure whether the North was bluffing, as part of its continuing high-risk stand-off over its nuclear ambitions.
The United States appeared unconvinced by the latest developments, with a US official telling Reuters news agency: "Our assessment of where they are on reprocessing is not 100% clear."
A US State Department spokesman said only that "it is something we follow very closely, we are always looking at all information available".
Wednesday's statement was the first time South Korea has publicly said the North has begun reprocessing spent fuel rods, which are stored at its nuclear facilities in Yongbyon.
It is also the strongest evidence so far that North Korea is pushing ahead with its nuclear weapons programme in defiance of US and international opinion, says the BBC correspondent in Seoul, Charles Scanlon.
NORTH KOREA'S NUCLEAR PROGRAMME
Yongbyon: Five megawatt experimental nuclear power reactor and a partially completed plutonium extraction facility. Activities at site frozen under 1994 Agreed Framework
Taechon: 200-MWt nuclear power reactor - construction halted under Agreed Framework
Pyongyang: Laboratory-scale "hot cells" that may have been used to extract small quantities of plutonium
Kumho: Two 1,000-MWt light water reactors being built under Agreed Framework
National Intelligence Agency director Ko Young-koo told parliament that his staff had noticed "high-explosive tests being conducted in Yongduk district", which is 40 km (25 miles)
northwest of Yongbyon.
Conventional high explosives can be used as the trigger for nuclear devices.
South Korea's Defence Ministry has already claimed that the North conducted numerous nuclear-related tests of explosive material in the 1980s and 1990s.
The 8,000 spent fuel rods are part of a plutonium-based nuclear weapons programme that was halted under a 1994 nuclear agreement between North Korea and the US and its allies.
The agreement crumbled last year after US officials said Pyongyang had admitted to having a secret atomic programme.
But the US and allies in the East Asian region are still trying to persuade Pyongyang to agree to multilateral talks to try to defuse tensions.
North Korea, however, remains insistent that it will only hold direct talks on the nuclear question with the US.
A North Korean delegation arrived in Seoul on Wednesday for a new round of ministerial-level talks on North-South co-operation.
On arrival, the delegates were characteristically unyielding.
"It is a grim reality that the black clouds of nuclear war
are gathering on the Korean Peninsula minute by minute," they said in a statement.
The South Korean president, Roh Moo-hyun, is currently on a visit to China, to try to enlist Beijing's help in finding a peaceful solution to the nuclear standoff.
During the trip, Mr Roh once again reiterated calls for Pyongyang to abandon its efforts to acquire nuclear weapons.