Carter met with Han Min-Koo in Seoul during an annual security meeting for the two allies to assess their ongoing military cooperation.
We "spoke candidly about North Korean threats," Carter told reporters.
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In a widely expected move, the defence chiefs signed an important agreement that defines conditions for a transfer of control of the South Korean military from the United States to Seoul in a time of war.
South Korea had been scheduled to take wartime control, known as OPCON, by the end of next year, but now the transfer is based on conditions being met and not a particular timeline.
North Korea's hostile rhetoric, rocket tests and unpredictable behaviour in recent years has prompted calls to put off the transfer. The two nations agreed in principle to this "conditions-based" approach last year.
Carter said the main conditions Seoul needs to meet are the further development of its intelligence capabilities and its counter-artillery powers.
"If we look at global trends in terms of national security, many countries in the world conduct self-defence in the form of cooperation with regional and local partners," Han said when asked why South Korea -- despite its enormous economic and political clout -- still wasn't ready to take control of its own military.
The defence chiefs also agreed to strengthen their capacity for dealing with cyber attacks -- another challenge posed by Pyongyang.
South Korea, one of the world's most wired nations, has blamed North Korean hackers for a series of cyber-attacks on military institutions, banks, government agencies, TV broadcasters and media websites in recent years.
Carter's visit to South Korea was his first international stop on an eight-day trip to the Asia-Pacific region.
He will meet leaders from more than a dozen nations across East and South Asia. Officially, his mission is intended to help push the next phase of America's foreign policy "rebalance" to the strategically important region.
The United States wants to boost relationships and security cooperation with countries in the Asia-Pacific region and has called the "rebalance" a priority for its 21st century security interests.
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