The beginning of the "Ulchi Freedom Guardian" exercise, which will last until August 29, came as Pope Francis led a mass for inter-reconciliation in Seoul at the end of the five-day trip to South Korea.
Although largely played out on computers, the drill involves tens of thousands of South Korean and US soldiers and is aimed at testing combat readiness for a North Korean invasion.
According to the South Korean Defence Ministry, this year's drill will, for the first time, simulate the response to a nuclear attack threat, using a strategy of "tailored" deterrence developed last year at annual South Korea-US defence talks.
South Korean officials said its military would be on a heightened state of alert during the exercise.
"If the North commits a provocative act, we would retaliate strongly", a high-ranking military official told journalists.