A South Korean naval ship sank near the disputed maritime border with North Korea, killing some of the more than 100 crew on board, but officials played down suggestions that it may have been attacked by the North.
"It is not clear whether North Korea was involved," Presidential Blue House spokeswoman Kim Eun-hye said.
Earlier, South Korean media had quoted officials as saying the North could have torpedoed the ship near the disputed western sea border that separates the two countries
The sinking comes as the impoverished North has become increasingly frustrated by its wealthy neighbour, which has rebuffed recent attempts to reopen a lucrative tourist business on the northern side of the Cold War's last frontier.
It also coincides with mounting pressure on Pyongyang to call off a more than one-year boycott of international talks to end its efforts to build a nuclear arsenal.
The presidential office had earlier also said a South Korean vessel had fired at an unidentified vessel in the North.
The government held an emergency security meeting following the incident, Yonhap news agency said.
The ship i sinking near the disputed Yellow Sea border off the west coast of the peninsula which was the scene of two deadly naval fights between the rival Koreas in the past decade.
Local media reports said at least 59 South Korean sailors survived the attack and an unknown number appeared to have been killed or are missing. A rescue operation was under way.
Navies from the rival Koreas exchanged gunfire for the first time in seven years in the Yellow Sea waters in November, damaging vessels on both sides.
The international community has been pressuring the North to give up efforts to build nuclear weapons, promising help for its broken economy if it does so.
There has been widespread speculation that North Korea's ruler, Kim Jong-il, was about to visit China, his only significant ally and on which he has depended almost entirely for economic aid after a new conservative government in Seoul effectively ended years of free-flowing assistance.
In Washington, US secretary of state Hillary Clinton said a nuclear arms reduction treaty announced with Russia earlier in the day showed states like North Korea that non-proliferation was a top priority for Moscow and Washington.