The South Korean president says the Korean peninsula is at a turning point, and there are opportunities for change.
In a televised New Year's speech President Lee Myung-bak said Seoul would "respond strongly" if provoked by North Korea, with whom it remains technically at war.
But he said the window was still open for the North and if it halted its nuclear programme the Seoul government was ready to return to talks.
The BBC reports that on Sunday North Korea told citizens to defend leader Kim Jong-un to the death.
Kim Jong-un has succeeded his father, Kim Jong-il, who died on 17 December at the age of 69.
Mr Lee said that peace was his priority and that a "window of opportunity" had opened for better ties with the North.
"The situation on the Korean peninsula is now entering a new turning point," he said.
"But there should be a new opportunity amid changes and uncertainty."
South Korea would, however, "thoroughly maintain national security as long as there is a possibility of provocation by the North", he added.
