As hopes of new negotiations between North Korea and the US have dimmed, Pyongyang has threatened to seek “a new way” forward if it cannot make progress with talks.
In response to the news, Donald Trump sent a warning to North Korea that it “must denuclearise”.
“Kim Jong-un is too smart and has far too much to lose, everything actually, if he acts in a hostile way,” Mr Trump wrote in a tweet.
A spokesperson for North Korea’s Academy of National Defence Science said the test on Saturday at the Sohae Satellite Launching Ground will have “an important effect on changing the strategic position of [the country] once again in the near future”.
Although the statement did not say what was tested, Kim Dong-yub, an analyst at Seoul's Institute for Far Eastern Studies, has said it is likely the country was testing a solid-fuel engine for an intercontinental ballistic missile (ICBM).
On Friday, CNN reported that a new satellite image indicated North Korea may be preparing to resume testing engines used to power satellite launchers and ICBMs at the site.
Seoul’s Defence Ministry has said it is closely monitoring the North's activities with the US.
The North Korean test “is meant to improve military capabilities and to shore up domestic pride and legitimacy”, according to Leif-Eric Easley, a professor at Ewha University in Seoul.
“With the activity at Sohae, Pyongyang is also trying to raise international concerns that it may intensify provocations and walk away from denuclearisation talks next year,” he said.
The Sohae launching centre in Tongchang-ri, in western North Korea, is where banned satellite launches have been carried out in recent years, provoking worldwide condemnation and UN sanctions.
North Korea has claimed its satellite launches are part of a peaceful space development programme.
However, outside experts say ballistic missiles and rockets used in satellite launches share similar bodies, engines and other technology.
US-North Korea diplomacy has largely remained deadlocked since the second summit between Mr Trump and Mr Kim in Vietnam in February.
The deadlock has stemmed from disputes over how much sanctions relief the North must get in return for dismantling its key nuclear complex, with the US being warned it must abandon hostile policies by the end of this year.
In recent months, North Korea has carried out tests of short-range missiles and other weapons, and hinted at resuming tests for nuclear and long-range missiles.
Kim Song, North Korea’s UN ambassador, told the UN on Saturday that denuclearisation had “already gone out of the negotiation table”.
Mr Song accused the Trump administration of pursuing a “hostile policy” towards North Korea and described major European countries as playing “the role of pet dog of the United States in recent months”.
“We regard their behaviour as nothing more than a despicable act of intentionally flattering the United States,” the ambassador said.
Additional reporting by AP