A lawmaker, briefed by the National Intelligence Service (NIS), says leader Kim Jong Un himself gave the order to make preparations.
"North Korea's terrorist attack could be in the form of causing harms to anti-North Korean activists, North Korean defectors or government officials," said Saenuri Party member, Lee Chul-woo, CNN reported.
Members of the ruling Saenuri Party held a closed-door meeting with the NIS, defense ministry and other ministries.
The NIS warning covered a large number of possible targets, including "subways, shopping malls, exhibition centers, power plants" as well as possible cyber attacks.
Seoul recently vowed to take "bone-numbing" measures against Pyongyang following last month's nuclear test and this month's satellite launch, both of which Seoul says violate United Nations Security Council resolutions.
South Korea decided to shut down its final symbol of co-operation with the North last week, the Kaesong Industrial Complex, which lies on the North's side of the border. The very next day North Korea expelled all South Korean workers, seizing all property and assets. The North cut key lines of communication with the South the same day.
South Korea's Presidential office said this latest NIS assessment highlights how important it is to pass an anti-terrorism bill they have been pushing for for some time.
Kim Sung-woo, a senior secretary at the Presidential office, known as the Blue House, said the law needs to be passed "so that there could be a legal and institutional framework on anti-terrorism so that it can protect our people's lives and property."
Opposition parties have voiced concern that an anti-terrorism bill could give too much authority to the NIS.