The environment ministry called on state prosecutors to probe Nissan Korea after saying tests had shown an emission defeat system on the Qashqai model that made it appear to be less polluting than it really was.
It also banned the sale of the vehicle in the country.
Senior environment ministry official Hong Dong-Kon, who handles transport-related regulations, told journalists: "Today, we're going to file a criminal complaint" against Nissan Korea's President Takehiko Kikuchi.
In a statement, Nissan said: "Nissan Korea's priorities are our customers, dealers and working closely and transparently with the Korean government concerning real-world NOx emissions of the Nissan Qashqai.
"We maintain, as we have throughout the discussions, that we have complied with all existing regulations and did not use an 'unjustified arbitrary setup' or an illegal defeat device in the vehicle.
"This vehicle was certified by the Korean government last year under regulations permitting the importation and sales of vehicles that comply with these emission standards.
The decision follows an investigation into 20 diesel- powered cars that began last December after German carmaker Volkswagen admitted having installed devices aimed at cheating emissions tests in 11 million diesel engines.
In April another Japanese giant, Mitsubishi admitted it had been falsifying fuel-economy tests for years, manipulating data to make cars seem more efficient than they were in reality. VW's admission in September plunged the company into its deepest-ever crisis.
In late April the company said it was setting aside 16.2 billion euros (USD 18.2 billion) in provisions to cover the anticipated costs of the scandal.
Last November Seoul ordered Volkswagen Korea to recall more than 125,000 diesel-powered cars sold in the Korean market and fined the firm 14.1 billion won.
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