The designation came as damage estimates soared to 4.78 trillion wonbillion dollars), 10 days after Typhoon Maemi, the most powerful storm to hit South Korea since records began, slammed into southern coastal areas.
The typhoon left 117 people dead and 13 unaccounted for, according to the Ministry of Government Administration and Home Affairs.
The designation covered 1,657 rural villages and 156 cities and counties, it said, adding residents and firms in disaster areas would receive state subsidies, compensation and tax breaks.
The government has promised to disburse more than one billion dollars for recovery efforts.
Each family of the dead or missing will receive 20 million won in compensation, while those who have farmland damaged or destroyed will get up to five million won.
The typhoon destroyed some 5,000 houses and 34,000 hectares (81,600 acres) of farmland.
The natural disaster added to a series of factors acting as a drag on the economy, already officially in recession.
Analysts and economists fear the devastation wrought by Maemi may pull down growth to below three percent.
South Korea, already in its first recession since it was hit by the Asian financial crisis in late 1997, is struggling against sluggish consumer spending and corporate capital expenditures.