It is the first time since 1980 that martial law was declared in South Korea.
Yonhap news agency cited the military as saying activities by parliament and political parties would be banned, and that media and publishers would be under the control of the martial law command.
Yoon did not cite any specific threat from the nuclear-armed North, instead focusing on his domestic political opponents.
The surprise move sent shockwaves through the country, which had a series of authoritarian leaders early in its history but has been considered democratic since the 1980s.
The Korean won was down sharply against the US dollar. A central bank official said it was preparing measures to stabilise the market if needed.
The White House did not immediately respond to a request for comment.
Some 28,500 US troops are stationed in South Korea to guard against the North. A spokesman for the US military command did not answer repeated phone calls.
Yoon said he had no choice but to resort to such a measure in order to safeguard free and constitutional order, saying opposition parties have taken hostage the parliamentary process to throw the country into a crisis.
“I declare martial law to protect the free Republic of Korea from the threat of North Korean communist forces, to eradicate the despicable pro-North Korean anti-state forces that are plundering the freedom and happiness of our people, and to protect the free constitutional order,” Yoon said.
Yoon did not immediately specify who constituted the pro-North Korean anti-state forces. But he has cited such forces in the past as hindering his agenda and undermining the country.
He did not say in the address what specific measures would be taken. Yonhap reported that the entrance to the parliament building was blocked.
“Tanks, armored personnel carriers, and soldiers with guns and knives will rule the country,” Lee Jae-myung, leader of the opposition Democratic Party, which has the majority in parliament, said in a livestream online.
“The economy of the Republic of Korea will collapse irretrievably. My fellow citizens, please come to the National Assembly.”
Yoon cited a motion by the country’s opposition Democratic Party (DP), which has a majority in parliament, this week to impeach some of the country’s top prosecutors and its rejection of a government budget proposal.
South Korea’s ministers on Monday protested the move by the opposition DP last week to slash more than 4 trillion won from the government’s budget proposal. Yoon said that action undermines the essential functioning of government administration.
