The move came days after South Korea and the United States wrapped up their annual joint military exercises which are always accompanied by a rise in cross-border tensions.
The South's Unification Ministry said it would allow Ace Gyeongnam, a South Korean aid group, to deliver farming materials, including 15 tonnes of fertiliser, for a greenhouse project in the North.
Seoul halted government aid shipments, including fertiliser, to North Korea after a conservative government took office in Seoul in early 2008.
Despite Pyongyang's heated denials, South Korea insisted the ship was sunk by a North Korean submarine and imposed an effective trade embargo which remains in place.
But the Unification Ministry said Monday's approval of the fertiliser shipment should not be seen as a relaxation of the sanctions regime.
"It's only a small amount of fertiliser and, because the particular organisation in this case was able to guarantee transparency on where and how it would be used, the government chose to approve the proposal," a ministry official told AFP.
