The craft, described as a "midget submersible", was seized in the same area that a North Korean submarine ran aground in 1996 - an incident that left 37 people dead and sent relations between the two Koreas plunging to their lowest level in years.
The discovery of the submarine yesterday, about 11 miles off South Korea's coast, threatened to chill efforts by the new administration of President Kim Dae-jung to end years of antagonism by engaging communist North Korea in cultural and economic activities.
After becoming entangled in a fishing net, the submarine was seized by the South Korean military and towed to Donghae, an east coast naval base.
Officials were being cautious because of the threat of booby traps.
"We need to take extra precautions because [the crew] might blow it up," a Defence Ministry official said.
Military officials said there was no noticeable activity from inside the submarine, but they thought there might be as many as a half dozen crewmen inside.
They described the boat as a 70-ton Yugo-class submarine. Navy experts said North Korea uses Yugo-class subs for infiltration of espionage agents and surveillance. The subs are armed with machine-guns.
Military officials said North Korean agents are trained to commit suicide to avoid capture. In the 1996 submarine incursion, 11 North Koreans were said to have been shot dead by one of their commanders who then killed himself.
"We suspect there's somebody inside, but we don't know how many," said a spokesman for the joint chiefs of staff.
North Korean media monitored in Seoul made no mention of the incident.
South Korean officials said the vessel got caught in a fishing net about 11 miles east of Sokcho, a coastal town just south of the North Korean border and about 125 miles north-east of Seoul.
The net had been set with buoys to be retrieved later. A passing fishing boat first spotted the entangled craft and radioed maritime police and the military.
Kim In-yong, skipper of the fishing boat, told police the drift net got caught in the submarine's periscope and propeller and that he saw three people on the vessel's deck trying to untangle it.
Sokcho is about five miles from where a North Korean submarine ran aground in September 1996, touching off a 53-day manhunt for its 26 occupants.
The search ended with 24 North Korean infiltrators and 13 South Koreans dead. One North Korean was captured and another was believed to have escaped.Reuse content