A senior US diplomat has branded North Korea a "criminal regime" involved in arms sales, drug trafficking and currency forgery.
Mr Vershbow became ambassador to South Korea in October
Alexander Vershbow, the new US ambassador to South Korea, was explaining why the US had imposed economic sanctions against the North.
The unusually harsh comments are likely to infuriate North Korea.
The North warned on Tuesday it could walk out of talks on its nuclear plans unless the sanctions were lifted.
But Mr Vershbow, who is a Russian specialist and former Nato envoy, told journalists on Wednesday that the sanctions were a matter of law enforcement.
"This is a criminal regime," he said.
"And we can't somehow remove our sanctions as a political gesture when this regime is engaging in dangerous activities such as weapons exports to rogue states, narcotics trafficking as a state activity and counterfeiting of our money on a large scale," he said.
Correspondents say the allegations are not new, but it is unusual for them to be made so publicly.
The timing of the comments will also cast doubt on the prospects of six nation talks on North Korea's nuclear ambitions.
The North agreed in principle in September to dismantle its nuclear weapons programmes in return for security guarantees and energy aid.
But there has been no progress since then, and Mr Vershbow's comments are likely to delay or even discourage Pyongyang's return to international talks on the issue.
South Korean Foreign Minister Ban Ki-moon said on Wednesday that Seoul wanted to resume the six party talks in mid-January, and urged the US and North Korea to resolve their dispute over sanctions bilaterally.
Washington agrees it would be better to keep the issue separate from the nuclear talks, and has reportedly offered to brief the North on the reasons for the sanctions.
"We are ready to negotiate the nuclear issue, but right now it's North Korea creating the artificial obstacle to the progress," Mr Vershbow said.
"Our enforcement of US law should not be used to hold up the six party talks," he said.
The US has been targeting what it sees as North Korea's illegal activities for some time.
In September, US financial institutions suspended transactions with a Macau-based bank that was alleged to have helped North Korea launder drug money and counterfeit currency.
Washington also froze the assets of eight companies accused of involvement in weapons sales.
A US report last March said that North Korea was "highly likely" to be engaged in state-sponsored drugs trafficking, citing the seizure in 2002 of a North Korea-owned ship allegedly carrying up to 125kg (275lb) of heroin in Australian waters.
It also cited allegations by unnamed defectors that North Korea was engaged in large-scale opium poppy production.
Analysts believe the impoverished state is reliant on remittances from trafficking and currency forgery to shore up its failing economy.
The US accused the North in a court indictment earlier this year of forging millions of dollars of high-quality counterfeit US dollar notes, known as supernotes.
But connecting such allegations and publicly labelling North Korea a "criminal regime" is unprecedented.
Pyongyang is notoriously sensitive to such labels. US-North Korean relations were seriously damaged by President Bush's branding of the North as part of an "axis of evil" in 2002.
Some analysts suspect hardliners have seized the initiative once again inside the Bush administration and that could prove a significant obstacle to further progress in the nuclear talks.