The move comes after a South Korean tourist was shot by a North Korean soldier at the resort last month, prompting strong protests from Seoul.
The North's military unit in the resort said in a statement carried by the official Korean Central News Agency that it would expel all South Koreans "we deem unnecessary" from the Diamond Mountain resort.
South Korea suspended tours to the resort - one of the symbolic reconciliation programs between the two sides - after the shooting, but there are still more than 260 southerners working there.
The North also warned it would take military actions against "even the slightest hostile actions" in the mountain resort and its military areas. It said it would limit the passage of South Koreans and their vehicles through the heavily armed border crossing leading there.
The warnings came two days after South Korea raised more doubts about North Korea's account of how the southern tourist was fatally shot by soldier in the resort on the North's east coast.
South Korean President Lee Myung-bak presided over a previously scheduled security meeting earlier Sunday to discuss the North's latest move as well as his upcoming summit with U.S. President George W. Bush, presidential spokesman Lee Dong-kwan said. He declined to give any further details.
The Unification Ministry, which handles inter-Korean affairs, was to announce Seoul's position later Sunday.
South Korean tour operator Hyundai Asan said it had no immediate comment, saying it will follow the government's position.
Seoul has repeatedly urged Pyongyang to cooperate in its investigation of the July 11 shooting death of a 53-year-old South Korean housewife, a demand rejected by the North.
South Korea has also suspended the tour program and said it could put on hold a separate tour program to the North's western border city of Kaesong if strict safety measures for visitors are not assured.
The North has claimed the woman strayed into a restricted military area while strolling on a beach before dawn and refused to comply with a soldier's order to halt, instead running away before being shot twice.
On Friday, the South said two days of tests at a beach to check North Korea's explanation of what happened showed the victim was likely shot while standing still or walking slowly.