According to analysis of the latest satellite imagery, the North has taken the three stages of the Unha-3 rocket off the launch pad and moved them into a nearby assembly line at Dongchang-ri in the country's northwest, the source said.
"It seems that North Korea has pulled down the rocket from the launch pad to fix technical problems," the source said, asking for anonymity.
The source said Pyongyang is expected to go ahead with a launch after repair works are completed.
The move comes after North Korea announced on Monday that it will extend the 13-day launch window by one week until Dec. 29 to fix a "technical deficiency" in the rocket's first-stage control engine module.
Min Kyung-joo, the chief of South Korea's Naro Space Center, said removing the rocket from the launch pad shows that the technical problems are not minor.
Earlier in the day, a Seoul official said the technical problem cited by North Korea appears to be connected with defects in the direction control system of the rocket's first-stage engine.
North Korean scientists and technicians are believed to have found the glitches while systematically conducting inspections of all systems, the official said, noting that the driving system needs a wing control motor to make the booster fly toward the intended direction.
The Unha-3 rocket is an improved version of the Taepodong-2 multistage ballistic missile launched by the communist state from Musudan-ri in its northeast in April 2009.
Its first stage is fitted with four booster engines of the Nodong shorter-range ballistic missile, based on the technology of Russia's SS-N-6 intermediate missile.
As repair work is currently under way and the North's northwestern region near the launch site is forecast to have snow and rain over the weekend, it would be hard to fire off a rocket within this week, the officials said.
Last-ditch diplomatic efforts are underway to dissuade the isolated country from launching the rocket, the second this year since a failed launch in April. South Korea, the U.S. and other countries see the North's rocket launch as a veiled test for its banned ballistic missile technology. The North is currently under U.N. sanctions for its previous missile and nuclear activities.