The reclusive communist state has confirmed it has successfully conducted a third underground nuclear test, defying UN orders to stop building atomic weapons.
Foreign Secretary William Hague "strongly condemned" the move, calling it a "violation of United Nations Security Council resolutions".
The test is a provocative move by Kim Jong Un
Demonstrators took to the streets of the South Korean capital, Seoul, to protest the launch, burning placards with pictures of Kim Jong Un, and North Korean flags.
North Korea had successfully detonated a "miniaturised" nuclear device in a "safe manner" at a test site in the north east of the country, state media said.
It said the test was aimed at coping with "outrageous" US hostility that "violently" undermined the North's peaceful, sovereign rights to launch satellites.
Pyongyang said the test had been carried out in a "perfect manner."
The United States Geological Survey said on Monday that it had detected a 4.9 magnitude earthquake in North Korea, at the country's nuclear testing site.
UN secretary general Ban Ki-Moon called the test "a clear and grave violation" of UN Security Council resolutions.
Hague said that North Korea's development of its nuclear and ballistic missile capabilities "poses a threat to international and regional security".
Activists from an anti-North Korea civic group burn placards of North Korean leader Kim Jong Un
He called for restraint, saying the country's "repeated provocations only serve to increase regional tension, and hinder the prospects for lasting peace on the Korean Peninsula."
The Foreign Secretary said UN resolutions committed the Security Council to taking "significant action" in the event of a further launch or nuclear test by North Korea.
"The UK will begin urgent consultations with security council partners calling for a robust response to this latest development," he said.
"North Korea has a choice to make - it can either engage constructively with the international community, cease developing its nuclear and ballistic missile programmes and return to negotiations, or face increasing isolation and further action by the security council and the international community."
South Korean President Lee Myung-bak holds the National Security Council meeting regarding North Korea's nuclear test at the presidential Blue House in Seoul
US President Barack Obama called the nuclear testing a "highly provocative act" that threatens US security and international peace.
In a statement President Obama promised to "continue to take steps necessary to defend ourselves and our allies."
He also urged "swift and credible action by the international community."
The president said North Korea has "increasingly isolated and impoverished its people through its ill-advised pursuit of weapons of mass destruction."
The nuclear test is North Korea's first since leader Kim Jong Un took power in December 2011 following the death of his father, Kim Jong Il, and marks a bold statement for the young leader as he unveils his domestic and foreign policy for a country long estranged from the West.
Experts say regular tests are needed to perfect North Korea's goal of building nuclear warheads small enough to be placed on long-range missiles.
This atomic test - North Korea's third since 2006 - is expected to take the capital Pyongyang closer to possessing nuclear-tipped missiles designed to strike the United States.
John Everard, who was British ambassador to North Korea at the time of the country's first nuclear test in 2006, said the latest test could be "a lot more serious".
"They are claiming that they have now miniaturised a nuclear device," he told the BBC Radio 4 Today programme.
"They have proven that they can launch a long range missile. If you marry a missile and a miniaturised device, so nuclear bomb on top of a missile so you can deliver it to all kinds of places that they couldn't have reached before."
South Korean conservative protesters deface a North Korean flag during a rally demonstrating against North Koreas nuclear test
He said that it was also possible that the North Koreans had for the first time tested a uranium device, rather than the plutonium devices it had tested previously.
"Its plutonium stock is limited so therefore the number of bombs they can make is also limited but uranium they have proven they can manufacture," he said.
"This means that they can manufacture all the bombs that they could want."
However he said that it could also be the test which finally stretches the patience of North Korea's key ally, China, to breaking point, prompting it to take action against its neighbour.
"There is not a lot of love lost between the two countries, however strong the rhetoric on internal friendship might be," he said.
"A lot of people are saying that this is getting ridiculous, that China is getting the runaround from the North Koreans, and that if they test again China really ought to take measures to stop the North Koreans misbehaving."
Answering questions in the Commons, Deputy Prime Minister Nick Clegg said the tests "threaten international peace and stability" and were in "direct violation" of Security Council resolutions.
He told MPs: "We are now undertaking urgent consultations with other members of the Security Council to determine what robust action we will take in response."