There were no South Korean casualties, the countrys Joint Chiefs of Staff said in a statement, and it was not immediately clear if there were any casualties on the North Korean side. Each side blamed the other for violating the sea border.
The exchange of fire occurred as U.S. officials said President Obama has decided to send a special envoy to Pyongyang for rare direct talks on the communist countrys nuclear weapons program. No date has been set but it would be the first one-on-one talks since Obama took office in January. Obama is due in Seoul next week.
Its a regrettable incident, South Korean Commodore Lee Ki-sik told reporters in Seoul. We are sternly protesting to North Korea and urging it to prevent the recurrence of similar incidents.
North Koreas military issued a statement blaming South Korea for the grave armed provocation, saying its ships crossed into North Korean territory.
The North claimed that a group of South Korean warships opened fire but fled after the Norths patrol boat dealt a prompt retaliatory blow. The statement, carried on the official Korean Central News Agency, said the South should apologize.
President Lee Myung-bak, who convened an emergency security meeting, ordered the Souths defense minister to strengthen military readiness.
South Koreas Joint Chiefs of Staff said in a statement that a North Korean patrol boat crossed the disputed western sea border about 11:27 a.m. (0227 GMT), drawing warning shots from a South Korean navy vessel. The North Korean boat then opened fire and the Souths ship returned fire before the Norths vessel sailed back toward its waters, the statement said.
The clash occurred near the South-held island of Daecheong, about 120 nautical miles (220 kilometers) off the port city of Incheon, west of Seoul, the statement said.
The North Korean ship was seriously damaged in the skirmish, a Joint Chiefs of Staff officer said on condition of anonymity, citing department policy. Prime Minister Chung Un-chan told lawmakers the ship was on fire when it fled north.
Lee, the commodore, said the shooting lasted for about two minutes, during which the North Korean ship fired about 50 rounds at the South Korean vessel, about two miles (3.2 kilometers) away. He said the South Korean ship was lightly damaged.
Lee said several Chinese fishing boats were operating in the area at the time of clash, but they were undamaged. Chung, the prime minister, described the clash as accidental, telling lawmakers that two North Korean ships crossed into South Korean waters in an attempt to clamp down on Chinese fishing.
Lee, however, said the South Korean military was investigating if the Norths alleged violation was deliberate.
The Koreas regularly accuse each other of straying into their respective territories. South Koreas military said that North Korean ships violated the sea border on 22 occasions this year.
The two sides have fought deadly skirmishes along the western sea border in 1999 and 2002.
No South Korean sailors were killed in 1999, but six South Korean sailors died in 2002, according to the South Korean navy. It said exact North Korean causalities remain unclear.
Baek Seung-joo, a North Korea expert at Seouls state-run Korea Institute for Defense Analyses, said the clash would not have a big impact on inter-Korean relations.
He said the Koreas held a landmark summit in 2000 and the North sent a cheering squad to the South for the Asian Games in 2002. Both events took place after the separate clashes in 1999 and 2002.
It was an intentional provocation by North Korea, Baek said, noting that Pyongyang appears to want to create tensions and use them for domestic political consumption.
The two Koreas have yet to agree on their sea border more than 50 years after the end of their 1950-53 Korean War, which ended in an armistice and not a permanent peace treaty. Instead, they rely on a line that the then-commander of U.N. forces, which fought for the South, drew unilaterally at the end of the conflict.
North Korea last month accused South Korean warships of broaching its territory in waters off the west coast and warned of a clash in the zone, which is a rich crab fishing area.
The latest conflict comes after North Korea has reached out to Seoul and Washington following months of tension over its nuclear and missile programs.
North Korea launched a long-range rocket in April and carried out its second underground nuclear test in May. But it subsequently released South Korean and U.S. detainees, agreed to resume joint projects with South Korea and offered direct talks with Washington.
Two administration officials said Monday in Washington that Obama has decided, after months of deliberation, to send a special envoy to Pyongyang for direct talks on nuclear issues.
Obama will send envoy Stephen Bosworth, although no date for his trip has been set, the officials said. The officials discussed the matter on condition of anonymity because the decision has not been publicly announced.
Hundreds of thousands of combat-ready troops on both sides face across the 155-mile-long (248-kilometers-long) land border that is also strewn with land mines and tank traps and laced with barbed wire. About 28,500 U.S. troops are stationed in South Korea to deter a potential North Korean aggression.
Despite Tuesdays clash, a joint industrial complex in the North Korean border town of Kaesong operated as usual, said South Korean Unification Ministry spokesman Chun Hae-sung. He said, however, that the South asked its citizens working in the North to be cautious.
The site, which combines South Korean capital and technology with cheap North Korean labor, is the most prominent symbol of inter-Korean cooperation. More than 100 South Korean firms employ thousands of North Koreans to manufacture products.