"The Olympic Committee of the DPRK (North Korea)... decided to dispatch DPRK players' group" to the Asian Games to be hosted by South Korea's western port city of Incheon, Pyongyang's official Korean Central News Agency (KCNA) said.
The committee has officially informed the Olympic Council of Asia of its decision, KCNA said.
Incheon welcomed the North's announcement saying it would help the two Koreas boost reconciliation.
Pyongyang boycotted the 1988 Olympics in Seoul but sent athletes and cheerleaders to the 2002 Asian Games in South Korea's southern port city of Busan.
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In July last year, a North Korean female football team competed in South Korea and won the smaller four-nation East Asian Cup tournament, which also involved Japan and China.
South Korea had invited the North to participate in this year's Asian Games, which it is hosting from September 19 to October 4, through the Olympic Council of Asia, the governing body for all sports in Asia.
The North on Friday rejected the allegation as "sheer fabrication", and Seoul in turn accused Pyongyang of a "blatant lie".