North Korean laborers did not show up for work on Tuesday at a factory complex operated with South Korea, companies with operations there said, effectively shutting down the zone for the first time since it began shipments in 2004.
Pyongyang's decision to halt work at the Kaesong industrial park coincided with speculation it would carry out a missile launch, or even another nuclear test, in what has become one of the worst periods of tension on the peninsula since the end of the Korean War in 1953.
About 475 South Korean workers and factory managers remain in Kaesong, a few kilometers inside the border with North Korea. The South Korean government said 77 would return on Tuesday.
Many South Koreans have been reluctant to leave, worried about the impact on their companies and jobs.
"North Korean workers didn't come to work today, and production has halted in our Kaesong facilities," said a spokeswoman for Shinwon, a women's clothing maker.
A spokesman for textile company Taekwang Industrial and at least two other firms also said North Koreans workers did not show up on Tuesday and that production had stopped.
More than 100 representatives from businesses operating at Kaesong were holding an emergency meeting at the complex that started at about 0100 GMT, Reuters witnesses said.
An executive at another South Korean apparel firm running a factory in Kaesong said late on Monday his employees had told him they would stay.
"I don't know what to do, honestly. I can't simply tell my workers to leave or stay," said the executive, who requested anonymity.
Tension has been rising since the United Nations imposed new sanctions on the North for carrying out its third nuclear test in February. Pyongyang has been further angered by weeks of military exercises by South Korean and U.S. forces and threatened both countries with nuclear attack.
Few experts had expected Pyongyang to jeopardize Kaesong, which accounts for $2 billion in annual trade and employs 50,000 North Koreans making household goods for 123 South Korean firms.
North Korea said on Monday it would suspend operations at the park, its sole remaining major project with the South. No decision had been made on closing Kaesong permanently, it said.
"They're using this as shock therapy because, regardless of what they say, if they close Kaesong the damage they will sustain will not be small," said Moon Seong-mook, a retired South Korean brigadier general who took part in previous military talks with the North.
"This is just another negotiating card they can use with South Korea."
The North's official KCNA news agency said Seoul was trying to "turn the zone into a hotbed of war" against the North. It did not elaborate.