President Lee Myung-bak said those who carried out the attack on the Cheonan, which killed 46 sailors, must be punished.
He also announced that Northern ships would be banned from Southern waters.
Meanwhile, US Secretary of State Hillary Clinton has urged China to co-operate with the US on North Korea.
Mrs Clinton told a US-China summit in Beijing that Pyongyang must be held to account for the attack on the Cheonan.
China is North Korea's sole ally and has remained silent on the Cheonan incident.
In a strongly worded televised address, Mr Lee said that the South was forgetting that it shared a border "with one of the most war-mongering nations on Earth".
He added that South Korea would refer the North to the UN security council in response to the sinking of the Cheonan.
The BBC's John Sudworth in Seoul says the measures are probably about as tough a response as the South could take, short of military action.
He says Mr Lee appears to have drawn a line, once and for all, under the more optimistic era of growing aid, trade and engagement between North and South known as the "sunshine policy".
'Fabrication'
The measures came a week after experts from the US, the UK, Australia and Sweden said in a report that a torpedo had hit the ship.
They reported that parts of the torpedo retrieved from the sea floor had lettering that matched a North Korean design.
North Korea denies any involvement in the sinking, calling the investigation results a "fabrication" and threatening war if sanctions are imposed.
The US has said North Korea must face international consequences over the incident.
Mr Lee steered clear of urging military action, adding that South Korea's ultimate goal was not military confrontation.
But he said that the South would invoke the right to defend itself if the North took aggressive action in future.
Other measures to be announced are expected to include staging anti-submarine drills with the US close to the maritime border.
