South Korean troops fired “dozens of shells” back, the statement said.
Seoul then began blasting anti-North Korean propaganda from loudspeakers on the border, resuming a tactic that both sides had halted in 2004. Failure, Pyongyang says, will result in further military action.
The incident prompted Seoul to stage the propaganda broadcasts. It said the shells landed near four military posts, but caused no injuries.
Fishing was suspended around three South Korean islands off the west coast, the coastguard said.
South Korea detected a projectile, assumed to be a small rocket, that was fired toward the western province of Gyeonggi, a South Korean Defense Ministry official told CNN. On Ganghwa Island, villagers near a site where the South operates one of its loudspeakers were also evacuated.
The broadcasts began after South Korea accused the North of planting land mines that maimed two South Korean soldiers earlier this month. Pyongyang also restarted its own loudspeakers aimed at the South. Local police squads have been dispatched in case of an emergency in Gyeonggi province, but other areas on the South Korea’s eastern coast have not been evacuated.
South Korea’s military, which said it fired dozens of artillery rounds in response, raised its alert status to the highest level.
South Korean businessmen safely returned to the South from the complex on Thursday despite the North’s provocation.
The Kaesong industrial estate hosts about 120 South Korean firms employing some 53,000 North Korean workers and is a vital source of hard currency for the cash-strapped North.
The North’s broadcasts mark the restoration of inter-Korean propaganda warfare along the border after the two Koreas stopped the practice in 2004 as part of their efforts to ease animosities.
The artillery exchange comes during another point of tensions between the Koreas: annual U.S.-South Korean military drills that North Korea calls an invasion rehearsal. South Korean residents in the area were ordered to evacuate, according to the South’s Yonhap news agency.
In the nearby border city of Paju, residents were asked to stay home, officials said.
The North’s capital of Pyongyang was mostly business as usual Friday morning, although propaganda vans with loudspeakers broadcast the state media line that the country was in a “quasi-state of war” to people in the streets.
The North has denied its role in the blasts which left two South Korean soldiers seriously injured.
Pyongyang’s powerful National Defence Commission had claimed that Seoul fabricated the evidence on the landmines and demanded video proof.
The two Koreas remain technically at war, because the 1950-1953 war ended in an armistice, not a peace treaty.
The United States, which has about 28,500 militray personnel in South Korea, said it was concerned and closely monitoring the situation.