Video has been released of North Korea celebrating its most important national holiday with a simulated missile strike on a US city.

The footage from Korean television shows leader Kim Jong-un watching proudly as video of a simulated missile strike on the US plays on a giant screen.

Members of the North Korean military applaud as an orchestra plays music to accompany the shocking video.

The scene was part of the celebrations for Day of the Sun which marks the anniversary of the birth of North Korean founder and former president Kim Il Sung.

The chilling footage reportedly played on a screen in the background of the celebration showed an intercontinental ballistic missile soaring across the Pacific Ocean - eventually crashing into US soil. The video cuts to an image of a tattered US flag surrounded by graves after the strike.

When the footage plays the crowd watching erupt in a roar.

View photos Kim Jong-un was pictured cheering as the video simulation showed a US city being destroyed by a North Korea nuclear missile. More

View photos Members of North Korea's military helped celebrate the occasion. Source: Supplied More

The video surfaced as tensions continue to rise between the US and North Korea.

North Korea has threatened "all out war" and earlier this week conducted a failed missile launch.

In defiance of United Nations sanctions, North Korea has conducted several missile and nuclear tests. They've also claimed they have developed a missile that is capable of striking US mainland.

Their latest missile test on Sunday failed a few seconds after launch.

View photos North Korean leader Kim Jong-un waves during a military parade for the celebration. Source: AP More

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