Defence ministers from the two Koreas failed to reach an agreement on Thursday on a joint fishing area in disputed waters off their western coasts, a key reconciliation step sought at a summit in October.
The leaders agreed at only the second summit of the states still technically at war and divided since the end of World War Two to have an area of economic cooperation off their west coasts as a way to reduce tension.
The deal fell apart after North Korea insisted on extending the fishing area deeper into waters claimed by South Korea, which Seoul rejected, pool reports from North Korea said. Pyongyang also turned down any attempt to extend the area into waters in its control. The defence ministers, holding only the first meeting in seven years, said in a joint statement their generals would discuss the joint fishing zone again soon.
South Korean Defence Minister Kim Jang-soo and the North's Kim Il-chol did agree "to consult and seek military confidence-building measures to avoid armed conflict in the West Sea (Yellow Sea)," pool reports by South Korean media from the meeting in Pyongyang said.
The North's powerful military also agreed to allow the first regular freight train service between the two Koreas since the 1950-1953 Korean War. South Korea said last week the two sides had agreed to start the train service from December 11.
The North's military, fearful of increased contacts with the outside world, at one time blocked a symbolic test run at two crossings built by the South into its isolated neighbour.
South Korean President Roh Moo-hyun, with about three months left in office in a largely unpopular presidency, is seeking to develop an area along the North's west coast and off the disputed sea border called the Northern Limit Line (NLL).
The NLL was set unilaterally by UN-led forces at the end of the Korean War and recognised since by the South's military as the de facto border. Pyongyang declared the line invalid in 1999.
Dozens of sailors from both Koreas were killed in clashes across the line in 1999 and 2002. Separately, Kim Yang-gon, the man who sat next to the North's leader Kim Jong-il during the October summit and is considered the reclusive state's spy chief, met South Korean officials in Seoul on Thursday to help implement pledges made at the summit. South Korea pledged at the summit to provide the North with aid to develop is dilapidated infrastructure that could be worth billions of dollars.