The defence ministry said the two bids had been submitted to the state arms procurement agency and the winner of the 8.6 trillion won (USD 7.8 billion) contract would be announced in July.
The competition pits the country's top civilian carrier Korean Air (KAL) and European aerospace giant Airbus, against a rival bid from Korean Aerospace Industries (KAI) in partnership with US firm Lockheed Martin.
The KF-X fighter project is designed to develop and produce 120 fighter jets of a new "indigenous" type to replace South Korea's ageing fleet of F-4s and F-5s.
Some experts see the KAI-Lockheed alliance as having the upper hand, as the same partnership developed the T-50 trainer, which is South Korea's first homegrown supersonic aircraft.
Also Read
Lockheed, which won a contract in 2013 to sell 40 F-35A joint strike fighters to South Korea, has promised to transfer key technologies for the KF-X project to Seoul.
South Korea's military procurement needs, especially where the air force is concerned, have overwhelmingly been met by US suppliers in the past -- a reflection of their close military alliance.
Korean Air currently operates aircraft maintenance workshops for both the South Korean and US air forces.
In a statement Tuesday, KAL described Airbus as "the most suitable partner" for the project, saying the European company had a strong commitment to transferring core technology to South Korea.
"Through cooperation with Airbus, we will develop an indigenous model, which is superior to the Eurofighter," it said.
Airbus has made a number of bids for the South's military contracts, including a USD 1.38 billion deal to provide air refuelling tankers.
The defence ministry's request for the project requires a new design, although experts say either bidder might opt for a heavily modified version of an existing fighter model.