President Donald Trump made the announcement at the White House, returning North Korea to a list of nations it was removed from nine years ago.
"It should have happened years ago," Trump said at the start of a Cabinet meeting. "In addition to threatening the world by nuclear devastation, North Korea has repeatedly supported acts of international terrorism, including assassinations on foreign soil."
The designation is the latest in a series of steps Washington has taken to isolate the North and force it to come to the negotiation table over its nuclear and ballistic missile programs.
Tensions spiked after the North tested two long-range missiles capable of reaching the U.S. mainland in July, and followed up with its sixth and most powerful nuclear test in September.
Trump earlier threatened to "totally destroy" the North if necessary.
On Monday he called Pyongyang "a murderous regime" that "must end its unlawful nuclear and ballistic missile development" and support for international terrorism.
He said the Treasury will announce additional sanctions Tuesday in line with the designation. Once all the new sanctions are announced over a two-week period, North Korea will be under "the highest level" of sanctions, he added.
North Korea will face restrictions on U.S. foreign assistance, a ban on defense exports and sales, and financial and other sanctions. But experts say the re-designation is largely symbolic because the regime is already under extensive U.N. and other sanctions for its nuclear and missile programs.
"It will give North Korea another reason to say we have a 'hostile' policy," said Robert Manning, senior fellow at the Atlantic Council in Washington. "It is a feel-good move for the U.S. so it can appear to be 'tough' in the eyes of the U.S. Congress, looking to sanction North Korea every way possible."
Trump also paid tribute to Otto Warmbier, an American college student who was arrested in Pyongyang last year and sent home in a coma in June. He died shortly afterward.
"As we take this action today, our thoughts turn to Otto Warmbier, a wonderful young man, and the countless others so brutally affected by the North Korean oppression," Trump said.
The announcement came less than a week after the American president returned from a 12-day Asia trip that largely focused on rallying international support to end North Korea's weapons programs.
It also came as the North has refrained from provocations for more than two months, leading to speculation of a possible resumption in talks between Washington and Pyongyang.
"We still hope for diplomacy," Secretary of State Rex Tillerson told a White House news briefing later in the day. He also warned North Korean leader Kim Jong-un: "This is only going to get worse until you're ready to talk."
South Korea said in response that it takes the measure “as part of the international community's common efforts to bring North Korea to the path of denuclearization through strong sanctions and pressure."
"As indicated by Secretary Tillerson's remarks, despite the relisting, the common stance of South Korea and the U.S. to continue with efforts to bring North Korea to the negotiating table for a peaceful resolution of its nuclear issue remains unchanged," the Ministry of Foreign Affairs said.
It added that the two countries will continue their close collaboration and consultations at all levels.
The presidential office, Cheong Wa Dae, also said it believes the designation will be conducive to resolving the North Korean nuclear standoff.
"We understand this is part of the international community's efforts to resolve the North Korean nuclear issue through maximum sanctions and pressure," a presidential official said on condition of anonymity.
"We believe this will be helpful in resolving the North Korean nuclear issue peacefully," he said, adding that Seoul and Washington have worked closely together on the designation and will continue close consultations going forward.
On Monday, South Korea's state spy agency told the National Assembly North Korea may conduct another nuclear test at any time although it hasn't yet detected specific signs.
Manning said the relisting "could generate resentment by Kim Jong-un and make it more likely he resumes missile and/or nuclear tests."
North Korea was put on the State Department's list of state sponsors of terrorism in 1988 for its bombing of a South Korean airliner that killed all 115 people aboard. In 2008, it was taken off in exchange for progress in denuclearization talks.
Under a law enacted Aug. 2, the department was required to determine within 90 days whether North Korea should be relisted.
Trump's national security adviser, H.R. McMaster, told reporters early this month North Korea appeared to fit the criteria following its alleged assassination of Kim's half-brother at a Malaysian airport in February.
Tillerson confirmed Monday that the use of chemical weapons in the murder was a factor behind the designation.
His department currently has three other countries on the list -- Iran, Syria and Sudan.BY THE YONHAP.