North Korea demanded Monday that the U.S. call off its annual military drill with South Korea, a report said, as rare talks between the North and U.N. forces ended without clear progress on defusing tensions.

South Korea's Yonhap news agency said the North made the demand during talks with the U.S.-led U.N. Command at the Korean border village of Panmunjom, held for the first time in nearly seven years. It came amid fears the North is gearing up to test-launch a missile believed capable of reaching U.S. territory.

Yonhap quoted an unnamed South Korean military official as saying the North warned the upcoming drill would "further stir up" tensions on the Korean peninsula.

The report said the U.N. Command insisted that the exercise — involving 26,000 American troops, an unspecified number of South Korean soldiers and a U.S. aircraft carrier — is purely defensive and not preparation for an invasion as the North claims.

North Korea has routinely condemned the regular U.S.-South Korea military drills as preparation for an invasion, although the allies have said they have no intention to attack.

Both the U.N. Command and the South Korean Defense Ministry said they couldn't confirm the report.

The U.N. Command only said the sides discussed "measures to reduce tension and introduce transparency" and agreed to further meetings during a half-hour of talks.

"The UNC welcomed this discussion with North Korea which holds the prospect for building trust and preventing misunderstandings between both sides," the statement quoted the command's chief delegate Maj. Gen. Johnny Weida as saying.

Command spokesman Kim Yong-kyu declined to comment whether the potential missile launch was discussed during the talks.

North Korea had called for the hastily arranged talks last week, saying it wants to discuss ways to reduce tensions, according to the U.N. Command, which monitors a cease-fire that ended the 1950-53 Korean War.

North Korea and the U.N. Command has held 14 rounds of such high-level military talks "when necessary" since 1998, according to command spokesman Kim.

Relations between the two Koreas are at their lowest point in a decade, with North Korea bristling over South Korean President Lee Myung-bak's hard-line policy toward Pyongyang. The tensions have intensified in recent weeks amid reports that North Korea is preparing to test a long-range missile.

Analysts say communist North Korea also wants to capture President Barack Obama's attention at a time when international disarmament talks with the regime remain stalled.

The North last week called its impending launch a peaceful bid to push its space program forward by sending a communications satellite into orbit and warned it would "punish" anyone who attempts to disrupt its plans.

Neighboring governments believe the satellite claim may be a cover for a missile launch and have warned the regime such a move would invite international sanctions. North Korea, which in 2006 tested a nuclear weapon and unsuccessfully fired a long-range missile, is banned from engaging in any ballistic missile activity under a U.N. Security Council resolution.

Obama is dispatching his envoy for North Korea, Stephen W. Bosworth, to Asia this week to discuss the nuclear dispute. Bosworth plans to meet with officials in China, Japan and South Korea, and will consult separately with Russian officials, the State Department said.

South Korea on Monday named career diplomat Wi Sung-lac, a former head of the Foreign Ministry's North American affairs bureau, as its new top nuclear envoy. Departing envoy Kim Sook has been appointed deputy head of the country's main spy agency, the National Intelligence Service.

The two Koreas remain divided by the world's most heavily fortified border. Although other nations contributed forces during the Korean War, U.S. troops are the only foreign combat forces left on the peninsula. The U.S. has 28,500 troops in South Korea.