SEOUL (AFP) - North and South Korea agreed to hold a second round of talks Sunday after marathon, night-long discussions fell short of resolving a crisis that has pushed them to the brink of armed conflict.

The two sides decided to meet again at 3pm (2pm Singapore time) to "narrow down differences" as talks finally broke off around 4am after nearly 10 hours of negotiation.

Held in the border truce village of Panmunjom, where the 1950-1953 Korean War ceasefire was signed, they were the highest-level inter-Korean talks for nearly a year - a reflection of the seriousness of the situation.

They began shortly after the passing on Saturday afternoon of a North Korean deadline for Seoul to halt loudspeaker propaganda broadcasts across the border or face military action.

Despite scepticism that Pyongyang would follow through on its threat, the ultimatum raised border tensions to their highest level for years, with the North re-positioning artillery units and South Korean and US fighter jets flying simulated bombing runs.

Thousands of South Korean civilians living on frontline border islands or near military propaganda units were evacuated from their homes to underground shelters as a preventive measure.

The talks were led by South Korean national security adviser Kim Kwan-Jin and his North Korean counterpart Hwang Pyong-So - a close confidante of leader Kim Jong-Un.