A disarmament-for-aid pact offered removal from the U.S. list of nations sponsoring terrorism - along with energy aid - if North Korea dismantled its nuclear program.
Friday's announcement was the first North Korean confirmation that the regime is undoing the disarmament process begun in November 2007 as part of a nuclear deal hashed out during talks with China, Japan, Russia, South Korea and the U.S.
Analysts said the North commonly uses such threats and hard-line tactics to negotiate more generous terms.
Pyongyang blamed Washington, saying its refusal to remove North Korea from a U.S. list of states that sponsor terrorism is a violation of that deal.
The U.S. says Pyongyang first must accept a plan to verify nuclear promises made in June - a demand the North rejected as an attempt to unilaterally disarm the country.
"Now that the United States' true colors have been brought to light, we neither wish nor expect to be delisted as a 'state sponsor of terrorism,"' the Foreign Ministry said in a statement carried by the country's official news agency, KCNA.
North Korea "will go its own way," it warned.
The threat - bound to set back already troubled negotiations to get the North to disarm in exchange for aid and political concessions came amid reports that North Korean leader Kim Jong Il suffered a stroke, adding to fears of instability in the region.
Eight of 11 key steps toward disabling Yongbyon have been completed so far. But now, "Work has been under way to restore its nuclear facilities in Yongbyon to their original state since some time ago," the North's statement said.
State Department spokesman Sean McCormack said in Washington that North Korea must make a choice about whether it wants to have a better relationship with the world - or "keep themselves isolated."
McCormack said Friday that North Korea has been "getting closer and closer" to the point where it will restart the reactor but has not gotten there yet. He urged the country "not to get to that point."
South Korean and U.S. officials say it would take at least a year for the North to restart the reactor if it is completely disabled.
Earlier in the day, North Korean diplomat Hyun Hak Bong, telling reporters the country was well on its way to restoring the Yongbyon reactor, warned Washington not to press the verification issue. He said the U.S. demand was never part of the disarmament deal.
The detailed, four-page outline of the verification process Washington seeks calls for a thorough inspection, soil samples, interviews with scientists and possible involvement of the U.N. nuclear agency.
Notoriously reclusive North Korea objected to the U.S. demand for proof to back up its declaration.
"The U.S. is insisting that we accept unilateral demands that had not been agreed upon. They want to go anywhere at any time to collect samples and carry out examinations with measuring equipment," he said. "That means they intend to force an inspection."
Even after the announcement, officials from both Koreas met Friday to discuss sending energy aid to the North as part of the disarmament deal.
During those talks, South Korea urged the North to resume disabling the nuclear facilities, but the North repeated its position on verification and the terror list, according to a South Korean official who spoke on condition of anonymity in line with department policy.
Still, the official said he believes the North "is still interested in continuing the six-party process," noting that Friday's talks were held at Pyongyang's suggestion.
South Korea's foreign minister, Yu Myung-whan, said North Korea's motivation for restoring Yongbyon remains unclear.
"It's still uncertain whether the North's measures are aimed at reversing the whole situation to the pre-disablement level" or are using the threat as a negotiating tactic, he told reporters in Seoul.
Such a tactic would not be unusual for the North, analysts said.
"This is aimed at pressuring the United States," said Yang Moo-jin, a professor at Seoul's University of North Korean Studies.
But the North does not appear to want to completely scuttle the six-party negotiations, said Koh Yu-hwan, a North Korea expert at Seoul's Dongguk University.
"The North is sending a message that it wants to maintain the six-party talks," he said. "The North also wants to get the remaining energy aid with winter drawing closer."
The nuclear announcement comes amid reports that the leader of the Stalinist nation is ill.
South Korean and U.S. officials say Kim, 66, known to have diabetes and heart disease, has suffered a stroke.
Speculation about Kim's health rose last week when he failed to appear at a key ceremony marking the communist country's birth 60 years ago. That followed weeks of absence from public view and reports that foreign doctors were flown to Pyongyang to treat him.
Last week, the North's No. 2 leader, Kim Yong Nam, and a senior Foreign Ministry official told Japan's Kyodo News agency that there are "no problems" with the leader and denounced the alleged reports about his health a "conspiracy plot."