North and South Korea exchanged artillery fire on Tuesday after the North shelled an island near their disputed sea border, killing at least two South Korean marines, setting dozens of buildings ablaze and sending civilians fleeing for shelter.

The skirmish began when Pyongyang warned the South to halt military drills in the area, according to South Korean officials. When Seoul refused, the North bombarded the small South Korean-held island of Yeonpyeong, which houses military installations and a small civilian population.

South Korea returned fire and dispatched fighter jets in response, and said there could be considerable North Korean casualties as troops unleashed intense retaliatory fire. The supreme military command in Pyongyang threatened more strikes if the South crossed their maritime border by "even 0.001 millimeter," according to the North's official Korean Central News Agency.

Government officials in Seoul called the bombardments "inhumane atrocities" that violated the 1953 armistice halting the Korean War. The two sides technically remain at war because a peace treaty was never signed.

The exchange was a sharp escalation of the skirmishes that flare up along the disputed border from time to time, and come amid high tensions over North Korea's claim that it has a new uranium enrichment facility and just six weeks after North Korean leader Kim Jong Il unveiled youngest son Kim Jong Un as his heir apparent.

Columns of thick black smoke could be seen rising from homes on the island in footage aired by YTN cable television. Screams and shouts filled the air as shells rained down on the island for about an hour. "I thought I would die," Lee Chun-ok, 54, told The Associated Press after being evacuated to the port city of Incheon, west of Seoul.

"I was really, really terrified, and I'm still terrified."

She said she was watching TV when the shelling began, and a wall and door in her home suddenly collapsed.

The United States, which has more than 28,000 troops stationed in South Korea, condemned the attack. in Washington, White House Press Secretary Robert Gibbs called on North Korea to "halt its belligerent action," and said the US is "firmly committed" to South Korea's defense, and to the "maintenance of regional peace and stability."

China, the North's economic and political benefactor, which also maintains close commercial ties to the South, appealed to both sides to remain calm and "to do more to contribute to peace and stability on the peninsula, Foreign Ministry spokesman Hong Lei said.

Yeonpyeong, famous for its crabbing industry and home to about 1,200 civilians as well as South Korean military installations, is west of the Korean mainland within sight of North Korean shores. There are about 30 other small islands nearby.

North Korea fired dozens of rounds of artillery in three separate barrages that began in the mid-afternoon, while South Korea returned fire with about 80 rounds, South Korea's Joint Chiefs of Staff said. The entire exchange lasted about an hour.

Two South Korean marines were killed and 16 injured, the Joint Chiefs of Staff said. Island residents escaped to some 20 shelters on the island and sporadic shelling ended after about an hour, according to the military. The skirmish occurred a day after the South Korean military began holding drills in the area, exercises that North Korea's military demanded an end to early Tuesday, the JCS said.

South Korean marines participating in the drill had been shooting artillery during those drills, but toward southern waters, away from North Korea, a military official said, speaking on condition of anonymity due to military rules.

President Lee Myung-bak ordered officials to "respond sternly" but to refrain from allowing the situation to escalate, according to a presidential official. He asked not to be identified, citing the issue's sensitivity.

Lee was convening an emergency security meeting, the official said.

The Koreans have remained in a technical state of war for decades because their three-year conflict ended in a truce, not a peace treaty, in 1953.

However, North Korea does not recognize the western maritime border drawn unilaterally by the United Nations at the close of the conflict, and the Koreas have fought three bloody skirmishes there in recent years.

In March, a South Korean warship went down in the waters while on a routine patrolling mission. Forty-six sailors were killed in what South Korea calls the worst military attack on the country since the Korean War. Seoul blamed a North Korean torpedo, but Pyongyang denied responsibility.