North Korea has denounced the use of its national flag as a target during US-South Korean war games as a "grave provocative act" and vowed to strengthen its nuclear deterrent.

South Korea said the flag was used for the first time in such an exercise to demonstrate determination to hit back at any cross-border aggression.

Some 2,000 South Korean and US troops along with jet fighters, tanks and attack helicopters took part in Friday's exercise to test responses to any assault, amid high tensions on the peninsula.

The allies' largest single-day joint live-fire exercise was timed to mark the 62nd anniversary of the start of the Korean War on June 25. The two sides are also staging a major three-day naval drill in the Yellow Sea involving a US aircraft carrier battle group.

It was unclear whether the flag was hit during the drill.

But the North's foreign ministry said late Sunday the use of its emblem was the "most vivid expression" of US hostility.

"It is an extremely grave military action and politically-motivated provocation to fire live bullets and shells at the flag of a sovereign state without a declaration of war," it said in a statement on official media.

The South's defence ministry said the flag symbolised the North's command post and was used for the first time in such live-fire drills.

"We used it to show our determination to strongly respond to any provocations by North Korea," a spokesman told AFP.

Tensions spiked in 2010 after the South accused the North of sinking one of its warships with the loss of 46 lives. The North denied that attack but shelled a South Korean border island in November 2010, killing four people.

Two months ago the North launched a long-range rocket in what was seen by the United States and its allies as a ballistic missile test. The United Nations condemned the failed launch and tightened sanctions.

Pyongyang has also threatened attacks on the South's government and conservative media for perceived insults to its regime, and military officials in Seoul said it has sometimes sent fighter jets close to the border.

In its latest statement the North said the US still wants to "swallow up" the entire Korean peninsula, 62 years after the start of the three-year conflict in which Pyongyang claims victory.

But it said its nuclear deterrent is "an all-powerful treasured sword for preventing a war and reliably protecting peace and stability" on the peninsula.

"The DPRK (North Korea) will further bolster up its nuclear deterrent for self-defence as long as the US, the world's biggest nuclear weapons state, persists in its hostile policy towards the DPRK," it said.

The North responded to UN criticism of its rocket launches in 2006 and 2009 by staging nuclear tests. It says it has no plans "at present" for a third test.

Six-party nuclear disarmament negotiations -- involving the two Koreas, China, the US, Russia and Japan -- have been stalled since December 2008.

Senior South Korean and Russian diplomats were to meet this week in Seoul to discuss possible ways to revive the forum, Yonhap news agency said.

Russia's deputy chief envoy to the talks, Grigory Logvinov, would hold talks with South Korea's nuclear envoy Lim Sung-Nam on Tuesday, it quoted an unidentified Seoul foreign ministry official as saying.