South Korea has suspended all trade and investment with North Korea in response to the North’s attack on a South Korean warship, which killed 46 sailors.
President Lee Myung-bak also banned Northern ships from Southern waters.
Last week a team of international investigators accused North Korea of torpedoing the Cheonan in March.
The sinking has cranked up tension on the peninsula to its highest in years.
The South says it will take the issue to the UN and called for an end to the regime of Kim Jong-il.
In a televised broadcast President Lee Myung-bak said:
“I solemnly urge the North Korean authorities to do the following: apologise immediately to the Republic of Korea and the international community. Immediately punish those responsible, and those involved in the incident. These are the basic measures that the North has to take before anything else.”
North Korea continues to deny responsibility and warned any move to punish Pyongyang would mean war.
US Secretary of State Hillary Clinton has urged China to cooperate with Washington on how to deal with the North.
Clinton, in Beijing for a US-China summit, said the North must be held to account.