North Korea is to restart a mothballed nuclear reactor in a move that could produce more plutonium for nuclear weapons.
The announcement came as the USA bolstered its forces in Korea and after a speech by leader Kim Jong-un was published in which he praised the country's nuclear weapons as a "deterrent".
It was unclear how quickly the plant, whose cooling tower was destroyed, would take to restart, although the move is a big blow to China's stated aim of restarting de-nuclearisation talks on the Korean peninsula.
In Beijing, a foreign ministry spokesman expressed regret at the decision.
Earlier, KCNA released a speech by Kim given over the weekend that appeared to dial down the prospects of a direct confrontation with the US as he stressed that nuclear weapons would ensure the country's safety as a deterrent.
"Our nuclear strength is a reliable war deterrent and a guarantee to protect our sovereignty," Kim said. "It is on the basis of a strong nuclear strength that peace and prosperity can exist and so can the happiness of people's lives."
As well as restarting the 5MW reactor at Yongbyon, the North's only known source of plutonium for its nuclear weapons programme, KCNA said a uranium enrichment plant would also be put back into operation, a move that could give it a second path to the bomb.
The nuclear plant's output would be used to solve what KCNA termed an "acute shortage of electricity" and to bolster "the nuclear armed force".
North Korea conducted its third nuclear test in February but is believed to be some years away from developing nuclear weapons, although it claims to have a deterrent.
After being hit with US sanctions for conducting the test and what it has viewed as "hostile" military drills being staged by Seoul and Washington in the South, Pyongyang has threatened a nuclear strike on the US, missile strikes on its Pacific bases and war with South Korea.
Washington, which has said it has not seen any evidence of hostile North Korean troop moves, deployed a warship off the Korean coast overnight.
The US earlier bolstered forces staging joint drills with South Korea with Stealth fighters and has made bomber overflights in a rare show of strength.
Kim's speech, delivered to the central committee meeting of the ruling Workers Party of Korea, appeared to show a change of tack, but it was some distance from signalling an end to the current crisis.
"The fact that this [speech] was made at the party central committee meeting, which is the highest policy-setting organ, indicates an attempt to highlight economic problems and shift the focus from security to the economy," said Yang Moo-jin of the University of North Korean Studies in Seoul.
The party congress meeting and a subsequent assembly of the country's rubber-stamp parliament reiterated the usual anti-American rhetoric and criticised South Korea, but the mood appeared to have changed.
The pariah state has once again started emphasising economic development as it shifts to the major 15 April celebration of the birth of its founder, Kim Il Sung, the grandfather of the current ruler.
Much of the rhetoric that has come from Pyongyang in recent weeks has been a repeat of previous bouts of anger, but the length and intensity has been new, leading to concerns that the tensions could spiral into clashes.
North Korea had said the region was on the brink of a nuclear war in the wake of the sanctions and the joint US and South Korean military drills.
In Washington, the White House has said the US takes North Korea's war threats seriously.
But White House spokesman Jay Carney said earlier this week: "I would note that despite the harsh rhetoric we are hearing from Pyongyang, we are not seeing changes to the North Korean military posture, such as large-scale mobilisations and positioning of forces."
A US defence official said earlier this week the USS McCain, an Aegis-class guided-missile destroyer used for ballistic missile defence, was positioned off the peninsula's southwestern coast.
It was not immediately clear where the ship was on Tuesday.
For the young Kim, it appears that cementing control of the party and state had now taken top priority as well as improving living standards in a country whose economy is smaller than it was 20 years ago, according to external assessments.
Kim appointed a handful of personal confidants to the party's politburo, further consolidating his grip on power in the second full year of his reign.
Former Premier Pak Pong-ju, a key ally of the leadership dynasty, was re-appointed to the post from which he was fired in 2007 for failing to implement economic reforms.
Pak, believed to be in his 70s, is viewed as a key confidant of Jang Song-thaek, the young Kim's uncle and also a protege of Kim's aunt.
Pak is viewed as a pawn in a power game that has seen Jang and his wife re-assert power over military leaders.