The United States said it took the announcement "seriously", but noted it followed a familiar pattern, while South Korea largely dismissed it as an old threat dressed in new clothing.
It was the latest in a string of dire-sounding pronouncements from Pyongyang that have been matched by tough warnings from Seoul and Washington, fuelling international concern that the situation might spiral out of control.
"As of now, inter-Korea relations enter a state of war and all matters between the two Koreas will be handled according to wartime protocol," the North said in a government statement carried by the Korean Central News Agency.
"The long-standing situation of the Korean peninsula being neither at peace nor at war is finally over," the statement said, adding that any US or South Korean provocation would trigger a "a nuclear war".
The two Koreas have technically remained at war for the past six decades because the 1950-53 Korean War concluded with an armistice rather than a peace treaty.
The North had announced earlier this month that it was ripping up the armistice and other bilateral peace pacts signed with Seoul in protest against South Korea-US joint military exercises.
The White House labelled the latest statement from Pyongyang as "unconstructive" and, while taking it "seriously", sought to place the immediate threat level in context.
"North Korea has a long history of bellicose rhetoric and threats and today's announcement follows that familiar pattern," said National Security Council spokeswoman Caitlin Hayden.
In Seoul, the Unification Ministry insisted the war threat was "not really new". The Defence Ministry vowed to "retaliate thoroughly" to any provocation, but added that no notable troop movement had been observed along the border.
Late on Saturday the North ratcheted up its threats, warning it could shut down the Kaesong industrial complex, a joint South-North venture that provides the regime with crucial hard currency.
"We warn that stern measures will be taken if (South Korea) continues to make reckless remarks defaming our dignity," a state body said, adding that the fate of the complex depends entirely on the attitude of Seoul.
Established in 2004 as a symbol of cross-border cooperation, Kaesong had managed to keep functioning despite repeated crises in inter-Korean relations.
But there have been concerns that its operations would be affected by Pyongyang's move on Wednesday to sever a military hotline used to monitor movement in and out of the zone.
Most observers however still believe this will remain a verbal rather than a physical battle.
"The North Koreans in recent weeks have turned rhetoric into performance art," said Gordon Flake, a Korea specialist and executive director of the Mansfield Foundation in Washington.
"When they have already declared the armistice null and void, I do not think a declaration of war breaks new ground," Flake said.
But he added that the situation had now become so volatile that any slight miscalculation carried the potential for rapid escalation.
Both China and Russia have called for calm, with a Russian diplomat voicing particular concern on Saturday.
"We expect all sides to show maximum responsibility and restraint and that no-one will cross the line after which there will be no return," Grigory Logvinov, a Russian foreign ministry pointman on North Korea, told the Interfax news agency.
"Naturally, we cannot remain indifferent when an escalation of tensions is taking place at our eastern frontiers," Logvinov was quoted as saying. "We cannot but worry."
On Friday North Korean leader Kim Jong-Un ordered missile units to prepare to strike US mainland and military bases, after US stealth bombers flew over South Korea.
The high-stakes standoff has its roots in North Korea's successful long-range rocket launch in December and the third nuclear test it carried out in February.
Both events drew UN sanctions that incensed Pyongyang, which then switched the focus of its anger to the annual joint South Korea-US military drills.
As tensions escalated, Washington has maintained a notably assertive stance, publicising its use of nuclear-capable B-52s and B-2 stealth bombers in the war games.
The long-distance deployment of both sets of aircraft out of bases in Guam and the US mainland were intended as a clear signal of US commitment to defending South Korea against any act of aggression.