Hundreds of riot police were deployed as the dispute erupted in the town of Paju, some 40 kilometres north of Seoul, when a dozen people with their faces hooded seized an activists' truck carrying balloons and leaflets.
Police also surrounded a bus carrying around 20 activists after local residents hurled eggs at it, shouting "Go back. Don't put our lives in danger!".
The activists had planned to release balloons carrying around 40,000 leaflets criticising the North's government across the heavily-militarised frontier.
"We will become the victims of shelling if leaflets are scattered," read another placard put up in a tree.
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The activists retreated after a two-hour protest during which they traded insults with the residents and chanted slogans such as "Let's terminate the dictatorship of (North Korean leader) Kim Jong-Un!".
However they did not abandon their attempt entirely, parking their bus on a road leading to the park with some insisting they should try again to float the balloons.
"Those instigated by North Korea ambushed us to block our event today but we will come back," Busan University professor Choi Woo-Won, the main organiser of today's event, told reporters.
Despite Seoul's stance that the activists have a democratic right to launch the leaflets, police intervened to prevent a clash between activists and residents.
More than 1,000 riot police were deployed in and around the park, the South's Yonhap news agency said.
Pyongyang, which refers to the activists as "human scum", has long condemned the launches and in recent weeks has stepped up its demands for Seoul to ban the practice entirely.
"If a rash act of scattering leaflets slandering our dignity and system is taken again in South Korea, its consequences will be very grave," Rodong Sinmun, the North's official newspaper, said in a commentary today.
The North has warned that failure to halt future launches could scupper the planned resumption of high-level talks between the two Koreas.