The two-stage Naro rocket operated normally during and after liftoff from the country's space center, Minister of Education, Science and Technology Ahn Byong-man said. But then communications with the rocket were lost after it reached an altitude of about 43 miles (70 kilometers).
"We believe that the Naro rocket is likely to have exploded," he told reporters. "We are sorry for failing to live up to people's expectations."
An image from a camera aboard the Naro brightened like a flash of light, possibly evidence of an explosion, Ahn said.
He said South Korean and Russian experts were trying to find the cause of the mishap. The first stage of the rocket was designed and built by Russia and the second by South Korea.
Ahn said that South Korea will begin preparations to announce a new launch date as soon as the origin of the problem is determined.
Ministry spokesman Pyun Kyung-bum said that debris from the rocket is believed to have fallen into the sea some 292 miles (470 kilometers) south of Oenaro Island, which is home to the space center.
The blastoff at the coastal space center in Goheung, 290 miles (465 kilometers) south of Seoul, was the country's second launch of a rocket from its own territory. In the first attempt last August, the satellite failed to reach orbit because one of its two covers apparently failed to come off after liftoff. The rocket on which it was carried functioned normally, so South Korea saw that launch as a partial success.
Since 1992, South Korea has launched 11 satellites from overseas sites, all on foreign-made rockets.
The launch was originally scheduled for Wednesday, but was delayed a day because fire retardant suddenly sprayed from three nozzles set up near the launch pad to extinguish any blaze.
South Korea wants to put a satellite into orbit to study global warming and climate change.
South Koreans are intensely proud of their country's rise from devastation and poverty after the end of the Korean War as well as their reputation for advanced technology and were closely observing the launch. About 100 people watched it on big screen televisions at Seoul's main railway station. People applauded when the rocket blasted off, though the mood turned anxious after the first news of a problem.
"I'm disappointed because maybe this tells me that Korea doesn't have the right technology yet," said Yoon Ho-soo, a writer who was sitting in front of a central Seoul subway station Thursday night.
South Korea's Ministry of Education, Science and Technology, which oversees the space program, says South Korea plans to develop a space launch vehicle with its own technology by 2020.
China, Japan and India are Asia's current space powers. Japan has launched numerous satellites while China sent its first astronaut into space in 2003 and carried out its first spacewalk in 2008.
India launched a satellite into moon orbit in 2008, but had to abandon it nearly a year later after communication links snapped and scientists lost control of it.
Despite the series of problems, South Korea wasn't about to give up on space.
President Lee Myung-bak urged the country's space engineers and experts to avoid feeling frustrated over the setback and aim for success next time.
"Though it's regrettable, much more can be learned through failure," he said in comment posted on the presidential Web site.