The joint drills, called the Ulchi Freedom Guardian, involves computer simulations to help forces prepare for war with a nuclear capable North Korea.
South Korean and US forces began computer-simulated military exercises on Monday amid tension over North Korea's weapons programmes, while a report it has earned millions of dollars in exports is likely to raise doubt about the impact of sanctions.
South Korean President Moon Jae-in said the joint drills, called Ulchi Freedom Guardian, were purely defensive and did not aim to increase tension on the peninsula.
"There is no intent at all to heighten military tension on the Korean peninsula as these drills are held annually and are of a defensive nature," Moon told cabinet ministers.
"North Korea should not exaggerate our efforts to keep peace nor should they engage in provocations that would worsen the situation, using (the exercise) as an excuse," he said.
The joint US-South Korean drills last until August 31 and involve computer simulations designed to prepare for war with a nuclear-capable North Korea.
The United States also describes them as "defensive in nature", a term North Korean state media has dismissed as a "deceptive mask".
Closer to "nuclear war"
North Korea views such exercises as preparations for invasion and has fired missiles and taken other actions to show its anger over military drills in the past.
"This is aimed to ignite a nuclear war on the Korean peninsula at any cost," the North's KCNA news agency said.
"The situation on the Korean peninsula has plunged into a critical phase due to the reckless north-targeted war racket of the war maniacs."
North Korea's rapid progress in developing nuclear weapons and missiles capable of reaching the US mainland has fuelled a surge in regional tension and UN-led sanctions appear to have failed to bite deeply enough to change its behaviour.
China, North Korea's main ally and trading partner, has urged the United States and South Korea to scrap the exercises. Russia has also asked for the drills to stop but the United States has not backed down.
Speaking in Beijing, Chinese Foreign Ministry spokeswoman Hua Chunying said North and SouthKorea and the United States all needed to make more effort to ease tension.
"We think that South Korea and the United States holding joint drills is not beneficial to easing current tensions or efforts by all sides to promote talks," she told a daily news briefing.