North Korea denounced an agreement between Seoul and Washington to build nuclear-powered submarines, saying in a state media commentary on Tuesday that the deal would cause a "nuclear domino" effect.

South Korean President Lee Jae-myung announced the finalisation of a long-awaited security and trade agreement with the United States last week, including plans to move forward with developing atomic-powered vessels.

Seoul said it had secured "support for expanding our authority over uranium enrichment and spent-fuel reprocessing".

In its first comments responding to the deal, the nuclear-armed North fired back, saying the submarine programme was a "dangerous attempt at confrontation".

The agreement is a "serious development that destabilises the military security situation in the Asia-Pacific region beyond the Korean peninsula and causes the situation of impossible nuclear control in the global sphere," said the commentary carried by the official Korean Central News Agency on Tuesday.

South Korea's possession of nuclear submarines "is bound to cause a 'nuclear domino phenomenon' in the region and spark a hot arms race", Pyongyang added. It also said "the DPRK [North Korea] will take more justified and realistic countermeasures" due to the two countries' "confrontational intention".

North Korean state media said in October that it had fired the ninth and final test of a ballistic engine, indicating that a full launch of a new ICBM could be conducted in coming months.

The commentary comes just a day after Seoul proposed military talks with Pyongyang to prevent border clashes, the first such offer in seven years.

Lee has also offered to hold broader discussions with the North without preconditions, a sharp reversal from the hawkish stance taken by his conservative predecessor.

The comments show concerns from North Korea that if South Korea acquires nuclear-powered submarines, "it could become a stepping stone to the country achieving a semi-nuclear-weapon-state status," Yang Moo-jin, a professor at the University of North Korean Studies in Seoul.

"The move is likely to negatively affect the prospects for holding inter-Korean military talks," he added.

North Korea has yet to respond to Lee's overtures. (AFP)