The warning was contained in a message sent yesterday by the secretariat of the National Defence Commission, the North's highest military body, through a military hotline, the South's defence ministry said.
In rallies on Tuesday to mark the death anniversary of Kim Jong-Il, South Korean conservative groups burned effigies of young North Korean leader Kim Jong-Un, his late father and grandfather.
The North said the rallies had insulted the "highest dignity" of its leadership, and threatened to take "merciless" retaliatory acts without prior warning, the defence ministry said.
The North's threat comes at a time of growing concern over the regime's stability after last week's execution of Jang Song-Thaek, a high-level official who was the uncle and former political mentor of Kim Jong-Un.
Seoul and Washington have warned of possible provocative acts by the nuclear-armed North.
North Korea has a long history of bellicose rhetoric, regularly threatening strikes against South Korea.
Tensions between the two Koreas had appeared to cool down after soaring in February, when the North carried out its third underground nuclear test in defiance of UN Security Council resolutions.
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