The warning from the Committee for the Peaceful Reunification of Korea (CPRK) came days after Pyongyang blasted South Korean President Park Geun-Hye's proposals for Korean reunification as the "daydreams of a psychopath".
Park was again the focus of the North's anger, with the CPRK denouncing comments she made during a recent tour of Europe.
"Our servicemen and people ... will never tolerate the enemy forces' attempts to insult our system and will make sure they pay a dear price for their madcap comments," the committee said in a statement carried by the official KCNA news agency.
During her tour, Park had warned that Pyongyang's nuclear material could end up in terrorist hands and warned of a possible Chernobyl-style disaster at the North's main nuclear complex.
The CPRK also took issue with Park's "viciously slanderous remarks" regarding political repression and human rights abuses in North Korea.
"This shows Park is the true kingpin and major culprit of slanderous insult," it said.
Under an agreement reached during rare, high-level talks in February, the two Koreas had resolved -- at Pyongyang's insistence -- to cease trading verbal insults.
The "no-slander" clause was always going to prove problematic, with North Korea insisting it should extend to the South Korean media as well as private groups and individuals.
Pyongyang saw Park's comments in Berlin and elsewhere as violating the agreement, and in recent weeks has directed increasingly personal attacks on the president, describing her at one point as "a peasant woman babbling to herself".
Monday's CPRK statement also criticised Park's defence, unification and foreign affairs ministers, as well as the "human scum" who testified before a UN-appointed panel investigating rights abuses in the North.
"Inter-Korean relations collapsed due to the ugly fantasies and vicious smear campaigns of the South's authorities ... and wicked conservative media," the CPRK said.
"We will never tolerate the mean smear campaigns by the South and will respond resolutely," it said.
The statement also included the first flat denial that North Korea was linked to three crashed drones found in the South.
Seoul's defence ministry said last week it was convinced the North was behind the three camera-equipped drones recovered in different parts of the country.
"The enemy forces are further stepping up their slander and smear campaigns by fabricating the ridiculous drone incident," the CPRK said.