Hundreds of divided family members from both Koreas were scheduled to meet at the North's Mount Kumgang resort from Wednesday in the first such reunion for three years.
But the North abruptly announced on Saturday that it was putting the event on indefinite hold, blaming the "hostile" attitude of the South Korean government.
"The decision to put off the event... Left family members deeply disappointed and wounded, and it's inevitable that it should be criticised by South Koreans and the international community," today said, a spokesman for Seoul's Unification Ministry that handles North Korea affairs.
The ministry had previously condemned Pyongyang's decision as "inhumane".
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Millions were separated from their families during the 1950-53 conflict that sealed the division of the Korean peninsula.
About 72,000 South Koreans -- nearly half of them aged over 80 -- are still alive and wait-listed for a chance to join the highly sought-after reunion events, which select only up to a few hundred each time.
The latest postponement has posed a new stumbling block in cross-border relations that recently showed signs of improving after a period of heightened tensions that followed the North's nuclear test in February.
Analysts say Pyongyang is using the reunion issue to pressure Seoul into resuming long-suspended tours to the Mount. Kumgang resort -- once an important source of hard currency for the impoverished North.