North Korea admitted conducting a "nuclear warhead explosion" test, hours after seismic monitors detected an artificial earthquake.
The test will allow North Korea to finally build "at will" an array of stronger, smaller and lighter weapons, Pyongyang said. However, these claims have never been independently verified.
It was the fifth nuclear test the secretive state has carried out, and the blast was more powerful than the bomb dropped on Hiroshima.
North Korea's state TV said the country was now capable of mounting nuclear warheads on ballistic rockets.
It said no leakage of nuclear material had occurred in the test and thatthere was no environmental impact.
The 5.3-magnitude explosion happened at 9.30am local time on Friday and had a zero depth, with an epicentre 11 miles from Sungjibaegam in the northeastern part of the county.
Yukiya Amano, director general of the International Atomic Energy Agency (IAEA), said that if it is confirmed that the blast was caused by a nuclear warhead, then North Korea would be in clear violation of numerous UN Security Council resolutions, and would show a complete disregard of the repeated demands of the international community.
Mr Amano added that the test is a "deeply troubling" and "regrettable" act.
South Korea's president was holding a National Security Council meeting as the country's military convened a crisis management team.
Japan's Prime Minister Shinzo Abe said that a nuclear test by North Korea could not be tolerated and that Japan would protest strongly to Pyongyang.
South Korean President Park Geun-hye said that North Korean leader Kim Jong Un was showing "maniacal recklessness" in completely ignoring the world's call to abandon his pursuit of nuclear weapons.
US President Barack Obama said the test would be met with "serious consequences", while the country's defence secretary, Ash Carter, said that if confirmed, the test would represent "serious provocation" and a significant threat.
Boris Johnson, the UK foreign secretary, said the test had caused "grave concern" as he said the UK would be pushing for a "robust response".
"The United Kingdom strongly condemns North Korea for conducting a further nuclear test, which is a flagrant violation of UN Security Council Resolutions and a threat to regional peace and stability," he said.
China, North Korea's only major diplomatic ally, said it was resolutely opposed to the test and urged Pyongyang to stop taking any actions that would worsen the situation.
After emergency radiation monitoring along its borders with North Korea, China confirmed that its radiation levels remain unchanged.
Japan has sent two military jets to also measure radiation levels.
The nuclear test coincided with the anniversary of the secretive state's 1948 foundation as a republic.