North Korea arrested Thursday two South Koreans engaged in espionage for the South’s spy agency.

North Korea arrested Thursday two South Koreans engaged in espionage for the South's spy agency, in a move that heightened tensions between the two rivals.

Kim Kuk-Gi and Choe Chun-Gil, who were identified by the North's official KCNA news agency as "heinous terrorists, operated from a base in the Chinese border city of Dandong.

"They zealously took part in an anti-DPRK (anti-North Korea) smear campaign," organized by US intelligence and the South Korean National Intelligence Service (NIS)," KCNA said.

The two arrested men were presented at a "press conference" in Pyongyang, attended by journalists and foreign diplomats.

South Korea on Friday demanded the immediate release of two nationals arrested on what it called "groundless" spying charges.

Reacting to the arrests, the South's Unification Ministry said "the government strongly demands North Korea immediately release our nationals ... and repatriate them at once," ministry spokesman Lim Byeong-Cheol told reporters.

Cross border ties are already strained over ongoing joint South Korea-US military exercises that Pyongyang has condemned as provocative rehearsals for invasion.