Foreign experts back the theory of a torpedo attack
South Korea's leader has told his security chiefs the response to the sinking of one of its warships must be "very prudent".
President Lee Myung-bak firmly blamed North Korea for the sinking when he addressed his security council.
It was a "surprise military attack from North Korea [that came] while South Korean people were resting late at night", he said.
Investigators said a torpedo hit the ship, killing 46 people.
The president is due to outline his plan of action early next week and this is thought likely to include taking the evidence of an attack to the UN Security Council in an attempt to win support for tougher sanctions on North Korea, the BBC's John Sudworth reports from Seoul.
The North would be "made to pay", South Korean Defence Minister Kim Tae-young told reporters at a separate briefing.
For its part, the North has dismissed the evidence of its involvement in the sinking, which includes parts of a torpedo found on the seabed, as "just fragments of aluminium of unknown origin".
However, there appears to be little doubt among other members of the international community because the conclusion that North Korea was to blame was backed up by experts from five other countries, our correspondent says.
President Lee told the security council the sinking of the Cheonan on 26 March had violated the UN Charter and the 1953 armistice which effectively ended the Korean War, his spokeswoman said after the meeting.
President Lee is due to outline the response next week
Ordering "systematic and resolute counter-measures against North Korea so that it cannot repeat this reckless provocation", he stressed the need for caution.
"Since this case is very serious and has a grave importance, we cannot afford to have a slightest mistake and will be very prudent in all response measures we take," he said.
Defence Minister Kim said the North had "surpassed the limits" set on the two states by the armistice.
"For those acts, the government will definitely make sure North Korea pays," he said.
The report by investigators, including experts from the US, the UK, Australia, and Sweden, found that parts of the torpedo retrieved from the sea floor had lettering that matched a North Korean design.
Earlier, a number of explanations had been suggested for the sinking - including an accidental collision with an unexploded sea mine left over from the Korean War.
After the release of the report, the US state department accused the North of a "serious provocation" and said there would "definitely be consequences".
America has some 28,000 troops stationed in the South.
Defence Secretary Robert Gates said the US was in "close consultation" with South Korea.
China, the North's closest ally, urged restraint and did not criticise Pyongyang.
The North accused the South on Friday of creating the conditions for war to break out on the Korean peninsula.
"It just produced fragments and pieces of aluminium whose origin remains unknown as 'evidence', becoming the target of derision," an official told state media.
ETA: US Secretary of State Hillary Clinton has warned North Korea must face international consequences over the sinking of a Southern warship in March.
She said on a visit to Tokyo that, despite Pyongyang's denials, evidence the North had torpedoed the ship was "overwhelming".
Speaking after talks with Japanese Foreign Minister Katsuya Okada, Mrs Clinton called on North Korea to "stop its provocative behaviour".
While she said it would be premature to discuss options before consultations with countries in the region, the evidence of a Northern attack was, in her words, "overwhelming and condemning".
"The torpedo that sunk the Cheonan... was fired by a North Korean submarine," she said.
"We cannot allow this attack on South Korea to go unanswered by the international community.
"This will not be and cannot be business as usual. There must be an international, not just a regional, but an international response."
Mrs Clinton, who is in Asia for a week-long tour, described the report on the sinking as "scientific", BBC state department correspondent Kim Ghattas reports from Japan.
Her choice of words was interesting, our correspondent says. China was sceptical about the investigation and said it had to be scientific. Mrs Clinton is heading to China next.