The KN-11 missile was launched from waters near Sinpo and flew about 500km before falling into the Sea of Japan, BBC quoted a US official as saying.
The test-firing came as tensions heightened on the Korean peninsula after South Korea and the US started annual war games, the military said.
A South Korean defence ministry official told Xinhua that North Korea test-fired a submarine-launched ballistic missile (SLBM) around 5.30 a.m. (local time) off Sinpo in South Hamgyeong province.
The military said it would "sternly and strongly respond to any provocation by North Korea", Yonhap news agency reported.
It was the longest flight among any known North Korean test-firing of SLBMs. The launch came just two days after Seoul and Washington kicked off their joint annual war games codenamed "Ulchi Freedom Guardian" (UFG).
Pyongyang has considered the drills as a dress rehearsal for a northward invasion, which the two allies claimed to be defensive in nature.
Japan's Prime Minister Shinzo Abe said the missile fell into Japan's ADIZ, an area of airspace over which a country exercises security controls.
He said it was an "unforgivable, reckless act" which "poses a grave threat to Japan's security".
The US State Department said it "strongly condemned" this and previous missile tests and would raise concerns at the UN.
The launch also coincided with a meeting of foreign ministers from Japan, China and South Korea in Tokyo.
The three regional powers agreed to "urge North Korea to exercise self-restraint regarding its provocative action, and observe the UN Security Council's resolutions", Japan's Foreign Minister Fumio Kishida said.
South Korea's presidential office, the Cheong Wa Dae, convened a national security council (NSC) meeting two hours after the test-firing, reflecting worries about an earlier-than-expected North Korean deployment of submarines capable of carrying nuclear-tipped ballistic missiles within a couple of years.
The Seoul defence ministry official said the launch was Pyongyang's show of force to escalate military tensions on the Korean peninsula.
China's Foreign Minister Wang Yi said Beijing was opposed to "any words and deeds that will cause further tension" on the Korean peninsula.
Last month, the US and South Korea agreed to deploy a missile defence system to counter threats from North Korea.
North Korea has conducted four nuclear tests to date -- its most recent claimed to have used a hydrogen bomb -- but despite its claims, it is not yet believed to have the ability to mount a nuclear device onto a warhead.
The communist nation is banned by the UN from any use of ballistic or nuclear technology. But in recent months it has carried out repeated missile launches, and is believed to be close to conducting its fifth test of a nuclear device.
Wednesday morning's launch appears to have been its most successful test yet of an SLBM. These missiles are of particular concern because of the mobility of submarines and the ease with which launch preparation can remain undetected.
