The government currently offers up to USD 217,000 to defectors from the North with sensitive information but this would be the first increase in reward money in two decades.
The rewards would go to "people who provide intelligence and knowledge that can enhance South Korea's security," Yonhap news agency reported.
The sums paid would be determined on the basis of the importance of the intelligence, Yonhap said.
The cash incentive is aimed at encouraging more members of the North's elite to flee to the South, it added.
High profile defectors have served as a vital source of intelligence about the reclusive Pyongyang government over the years.
In August 2016, North Korea's former deputy ambassador to Britain Thae Yong-Ho became one of the highest-ranking defectors.
He has vowed to raise awareness about the "gruesome realities" of his country.
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