Moon, who was sworn in last week, warned that the North's nuclear and rocket programmes were "advancing rapidly", days after Pyongyang launched what appeared to be its longest-range missile yet.
"I will never tolerate the North's provocations and nuclear threats," he said on a visit to the defence ministry, urging the South's military to adopt a "watertight defence posture".
"We are living in the reality where there is a high possibility of military clashes" along the disputed sea border off the Koreas' west coast or along the heavily-fortified land frontier that divides them, he said.
Left-leaning Moon favours engagement with the North to bring it to the negotiating table, but after Sunday's missile launch said dialogue would be possible "only if Pyongyang changes its behaviour".
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The North claimed the rocket was capable of carrying a nuclear warhead, although there are doubts whether the country could build a warhead small enough to fit into a missile.
The two Koreas -- technically still at war after the 1950-53 conflict ended only with a ceasefire -- have occasionally clashed along the border.
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