"If North Korea completes development of intercontinental ballistic missiles and weaponizes it with nuclear warheads, I will consider that a red line", Moon said.
Pyongyang carried out its first successful tests of an intercontinental ballistic missile (ICBM) last month, apparently bringing much of the United States mainland within its reach.
Moon Jae-in also declared, amid fears in South Korea that threats from President Donald Trump to unleash "fire and fury" on Pyongyang could lead to real fighting, that there would be no second war on the Korean Peninsula.
North Korea has in the past fired missiles and taken other steps in response to exercises.
Moon's policy on Pyongyang came in for criticism from his rivals, particularly Hong of the Liberty Korea Party and Ahn of the People's Party, who both touted tougher lines on North Korea.
Moon, who took office in May, held a news conference Thursday to mark the first 100 days of his presidency.
"All South Koreans have worked so hard to rebuild the country in ruins after the Korean war", said Mr. Moon.
"It struck me that Steve Bannon said more or less the same thing, but in more colorful language", said Christopher Green, senior adviser on the Korean Peninsula at the International Crisis Group.
"I think (Trump) is thinking that this won't result in any deaths back home, and if a war happens it will be far from home", Aoki said.
Bannon may not have been speaking on behalf of the U.S. government in the interview, and Secretaries of Defence and State Jim Mattis and Rex Tillerson took a tougher line after talks with their Japanese counterparts.
In Beijing, Gen. Dunford agreed Thursday that a military solution to the North Korean problem "absolutely horrific".
Fan Changlong, a vice chairman of China's powerful Central Military Commission, told Dunford that China believed the only effective way to resolve the issue was through talks.
"China insists that consultation through dialogue is the only effective way to solve the problems on the peninsula, and military means can not be an option", Fan said when meeting with Dunford.
Still, Dunford said that Trump had told American military leaders "to develop credible viable military options and that's exactly what we're doing".
Trump tweeted early Wednesday that Kim had "made a very wise and well reasoned decision", amid indications North Korea had decided not to proceed with its multiple missile launch.
North Korea's rapid progress in developing nuclear weapons and missiles capable of reaching the US mainland has fueled a rise in tensions in recent months. "This is an unpardonable plot toeing the USA line to suffocate the DPRK", it said, using the abbreviation of the North's official name.
Moon, meanwhile, vowed not to allow a new war on the peninsula, which was devastated by the 1950-53 war, which ended in an armistice instead of a peace treaty.
Annual military drills involving tens of thousands of US and South Korean troops are due to begin on Monday. The liquid-fuel missile is created to be fired from road mobile launchers and has been described by North Korea as built for attacking Alaska and Hawaii.
"Until somebody solves the part of the equation that shows me that 10 million people in Seoul don't die in the first 30 minutes from conventional weapons, I don't know what you're talking about, there's no military solution here, they got us", Bannon told The American Prospect.
Amid the current tensions, these calls have been gaining ground.
But the United States and South Korea are set to begin their annual 10-day Ulchi Freedom Guardian joint exercises on Monday, involving tens of thousands of troops. A survey conducted by polling company Embrain this week found that two-thirds of respondents wanted South Korea to have tactical nuclear weapons and nuclear-powered submarines. "We can't lose everything with another war", Moon said.