North Korea fired two rounds towards a frontline unit and South Korean soldiers returned fire three times.
The shooting occurred in Hwacheon, some 90km (56 miles) north-east of the South's capital, Seoul, according to reports from South Korea's YTN TV.
Officials say it was not clear if North Korea's initial shots were a deliberate provocation.
The border between the two Koreas is one of the most heavily fortified in the world, with many thousands of troops stationed on either side of a demilitarised zone.There have been frequent incidents at sea, but this is believed to be the first cross-border shooting on land since 2006.
South Korea's military is currently on its highest state of alert, as the capital prepares to host a meeting of world leaders from the G20 group of nations on 11 and 12 November.
Tensions high A spokesperson for the Joint Chiefs of Staff in Seoul said that no South Koreans were hurt in the exchange of fire, AFP reports.
"There were no more shots afterwards. We are now closely watching their movements," the unnamed spokesperson said.
The BBC's John Sudworth, in Seoul, says that the exchange appears to have been a small incident which did not cause any damage.
South Korean officials are not ruling out the possibility that the initial shot from the northern side of the border was accidental rather than deliberate, our correspondent adds.
Tensions between the two rivals have been high since the South accused the North of torpedoing one of its warships in March, with the loss of 46 lives. Pyongyang denies the charge.
Earlier on Friday the North warned that relations with its neighbour would face a "catastrophic impact" if South Korea continued to reject talks aimed at easing tension.
The first round of discussions in two years ended without progress in September after Seoul demanded an apology from Pyongyang for the warship sinking.