An international inquiry blamed North Korea for sinking the warship, but Pyongyang has denied any involvement.

Speaking at a news conference in Seoul, Clinton said the measures would increase Washington's ability to "prevent North Korea's proliferation, to halt their illicit activities that help fund their weapons programmes, and to discourage further provocative actions".

 She said the sanctions were not directed at the North Korean people but at the "misguided and malign priorities of their government".

The BBC's John Sudworth in Seoul says few details were given about how the sanctions would work, but that they were clearly intended as punishment for the alleged attack on the ship.

Clinton said she expected North Korea to "take certain steps that would acknowledge their responsibility" for the incident and to move towards denuclearisation.

"They know very well that they made commitments over the last years to the denuclearisation of the Korean peninsular, which they have reneged on and which we expect them to once again adhere to," she told reporters.

"We are looking for irreversible denuclearisation."

The announcement came after Clinton and US Defence Secretary Robert Gates visited the Demilitarised Zone (DMZ) between North and South Korea, in a show of support for Seoul following the sinking of the Cheonan in March.

Speaking at the DMZ, Clinton said she wanted Pyongyang to know "there is another way".

"But until they change direction, the United States stands firmly on behalf of the people and government of the Republic of Korea, where we provide a stalwart defence along with our allies and partners."

The warship dispute has led to heightened tensions between North and South Korea in recent months.

On Tuesday, the nominee to be US director of national intelligence warned that incident might herald a "dangerous new period".

James Clapper told a Senate hearing that Pyongyang might seek "to advance its internal and external political goals through direct attacks".

Gates said there were signs Pyongyang was becoming more provocative as it prepared for its ailing leader, Kim Jong-il, to hand over power.

"I think it is something that we have to look at very closely, we have to keep it in mind and be very vigilant," he said.

Gates said the US was taking steps to "further strengthen deterrence and also demonstrate our determination not to be intimidated".

But our correspondent says Pyongyang is unlikely to heed the warnings from Washington - it has already dismissed upcoming US-South Korean naval exercises as "dangerous sabre-rattling".

The first manoeuvres, in the Sea of Japan (East Sea) for four days from Sunday, will involve the nuclear-powered aircraft carrier USS George Washington and 20 other ships and submarines, as well as 100 aircraft and 8,000 personnel. Later exercises will take place in the Yellow Sea.

China has objected to any foreign military operations in the Yellow Sea, which is on the western side of the Korean Peninsula.

North and South Korea technically remain at war because their three-year conflict ended in an armistice in 1953 and no peace treaty was signed.

The US has since stationed thousands of troops in South Korea. (BBC)