SEOUL, South Korea (AP) -- In a blow to Korean reconciliation efforts, a North Korean navy boat sank a Southern patrol boat in the Yellow Sea Saturday, killing at least four South Korean sailors, wounding another 20, and leaving at least one missing.

South Korea said the boat entered Southern waters, ignored warnings to withdraw and fired with heavy caliber weapons, scoring a direct hit on the steering room of a speedboat with 27 sailors. The vessel caught fire. North Korean officials countered that their boat only fired in self defense in Northern waters.

It was the worst border clash in three years between the rivals, which share the world's last Cold War frontier.

There was no immediate word on North Korean casualties or missing in the 21-minute fight. A Northern warship was seen being towed away in flames, according to South Korea's Joint Chiefs of Staff.

The South Korean military said a squadron of fighter jets patrolled the sea border afterward, and a 1,200-ton battleship deployed closer to the area.

The clash was a setback to President Kim Dae-jung's so-called sunshine policy of trying to engage the isolated, communist North, which shares a sealed, heavily fortified border with the South. The 1950-53 Korean War ended with an armistice, not a peace treaty.

The military provocation of pre-emptive firing by a North Korean navy patrol ship is a clear violation of the armistice and an act that raises tension on the Korean peninsula. We cannot keep silent, the presidential Blue House quoted Kim as saying at an emergency meeting of the National Security Council.

In a statement after the hourlong meeting, Defense Minister Kim Dong-shin demanded an apology, punishment of those responsible and a promise from North Korea that such an incident would not happen again.

But North Korean state-run media denied the South's claims that its boat fired first, saying the communist vessel was defending itself against an intrusion into Northern waters.

The South Korean military authorities sought to invent any shocking incident in order to disrupt efforts to improve inter-Korean relations, said KCNA, the North's news agency.

South Korea's opposition Grand National Party, which has criticized Kim's policy toward the North as too lenient, said in a statement that the sea battle throws cold water over warming ties. It speculated that North Korea was trying to disrupt the World Cup soccer tournament, which is being co-hosted by South Korea and Japan and ends Sunday.

We urge the people to continue their everyday life with ease and resolution as the military and the government is thoroughly prepared, presidential spokeswoman Park Sun-sook said.

It was unclear how the incident would affect prospects for a revival of long-suspended dialogue between North Korea and the United States, South Korea's chief ally.

On Thursday, a U.S. State Department official proposed to North Korean diplomats at the United Nations that talks resume in the second week of July in Pyongyang, the North Korean capital

A North Korea expert at the Sejong Institute, a private research center in Seoul, speculated that the North might apologize secretly to the South for what he believed was an isolated case.

If the case is not resolved smoothly, it will have a devastating impact on South-North relations as well as U.S.-North Korean relations, said the expert, Paik Hak-soon.

South Korea's Unification Ministry, which handles North Korea policy, said exchanges between local non-governmental groups and North Korea would continue despite the clash.

South Korea said two communist boats intruded up to 3 miles into South Korean waters, ignoring warnings to withdraw, broadcast from South Korean military boats with loudspeakers.

The clash occurred at 10:25 a.m. when two South Korean navy vessels tried to repel two North Korean navy warships and an unspecified number of Northern fishing boats, the Southern military said.

The South Korean military said a communist boat fired from about 500 yards away. The dead included a lieutenant and three enlisted men. The South Korean military said 22 sailors were injured, but later revised the number to 20.

The maritime border between the two Koreas is not clearly marked. South Korea accused North Korea of making 12 brief border violations in the western sea last year.

In the summer of 1999, a series of border violations by North Korean ships touched off the first naval clash between the two Koreas since the Korean War. One North Korean warship sank and about 30 North Korean sailors died, according to South Korea. Several South Korean sailors were wounded.

The gun battle Saturday followed a series of border incursions by North Korean navy ships into South Korean waters in the area in recent weeks.

The Koreas were divided in 1945. The United States keeps 37,000 troops in South Korea as a deterrent against North Korea.