"I think we would have to withdraw South Korean staff from Kaesong for their own security if the situation required us to do so," Unification Minister Ryoo Kihl-Jae told journalists on Friday.
However, the current threat to their security was not "so high" as to consider an imminent evacuation, Ryoo said, adding that any action would be taken in consultation with the 123 South Korean companies operating in the complex.
Ryoo gave no indication as to how the evacuation might be carried out.
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A remark earlier this week by the South Korea defence minister that there was a "military" contingency plan in place incensed Pyongyang, which threatened to pull out its 53,000 workers and shut the whole complex down.
Kaesong, which lies 10 kilometres inside the North and has become a chip in a high-stakes game of military brinkmanship on the Korean peninsula, was closed on Friday for a scheduled holiday.
With inter-Korean tensions at their highest level for years, North Korea has blocked South Koreans from accessing Kaesong since Wednesday.
The Unification Ministry said there were still 608 South Korean citizens in Kaesong on Friday, after 253 returned to the South. A further 100 were scheduled to cross the border on Saturday.
South Korean managers have warned that the blocking of raw materials and personnel movement could force them to shut their Kaesong operations in a matter of days.
Established in 2004, the industrial zone is a crucial hard currency source for North Korea.
Neither of the Koreas has allowed previous crises to significantly affect the complex, which is the only surviving example of inter-Korean co-operation and seen as a bellwether for stability on the Korean peninsula.
Stressing that South Korea would never "passively submit" to North Korean threats, Ryoo vowed a strong response to any provocation from Pyongyang while keeping the door to future dialogue open.
"When North Korea chooses to walk the right path towards change, we will adopt a flexible approach and provide assistance together with the international community," Ryoo said.
