The news comes after the North in August test-fired a submarine-launched missile (SLBM) 500 kilometres (around 300 miles) towards Japan, which leader Kim Jong-Un said put the US mainland and the Pacific within striking range.
"Commercial satellite imagery strongly suggests that a naval construction program is underway at North Korea's Sinpo South Shipyard, possibly to build a new submarine," the US-Korea Institute at Johns Hopkins University said on its closely-watched website, 38 North.
"If this activity is indeed to build a new submarine, it would appear to be larger than North Korea's GORAE-class experimental ballistic missile submarine, which has a beam of approximately 7 meters."
Analysts say that while Pyongyang has made faster progress in its SLBM system than originally expected, it is still years away from deployment.
A proven SLBM system would take North Korea's nuclear strike threat to a new level, allowing deployment far beyond the Korean peninsula and a "second-strike" capability in the event of an attack on its military bases.
South Korea's military authorities believe Pyongyang is eyeing a submarine capable of carrying multiple SLBMs, to replace an existing experimental submarine used for the August test, according to Seoul's Yonhap news agency.
North Korea is barred under UN resolutions from any use of ballistic missile technology, but this year alone it has test-fired more than 20 missiles and carried out two nuclear tests.
Its fifth and most powerful nuclear test on September 9, when Pyongyang detonated what it said was a miniaturised atomic bomb, provoked worldwide condemnation and prompted the UN Security Council to begin work on a new sanctions resolution.
Also this month, the North claimed to have successfully ground tested a new, high-powered rocket engine, a move Seoul said was designed to showcase its progress towards being able to target the US east coast.