The North's KCNA news agency said yesterday the engine would help North Korea achieve world-class satellite-launch capability, indicating a new type of rocket engine for an intercontinental ballistic missile.
The North's announcement of a successful engine test came as US Secretary of State Rex Tillerson was in Beijing at the end of his first visit to Asia for talks dominated by concern about North Korea's nuclear and missile programmes.
"Through this test, it is found that engine function has made meaningful progress but further analysis is needed for exact thrust and possible uses," Lee Jin-woo, deputy spokesman for the South Korean defence ministry, told a regular briefing.
State-run North Korean media reported that leader Kim Jong-un had hailed the successful test of a new high-thrust engine at its rocket launch station as "a new birth" of its rocket industry.
Mr Lee said the test featured a main engine supported by four supplementary engines.
However, he did not elaborate on the progress the test showed the North had made, nor comment on whether the engine could be used for an intercontinental ballistic missile (ICBM), saying the South Korean military was conducting analysis.
US President Donald Trump told reporters he held meetings on North Korea at the weekend at his Florida resort.
While he did not refer specifically to the rocket-engine test, he said Mr Kim was "acting very, very badly".
A South Korean analyst said the test was an ominous development.
"This was a comprehensive test for the first-stage rocket for an ICBM, and that is why it was dangerous," said Kim Dong-yub, an analyst at Seoul's Institute for Far Eastern Studies.
"It appears that North Korea has worked out much of its development of the first-stage rocket booster."