Police quoted the owner as saying the North Korea-themed decorations were intended to attract attention and make the restaurant more profitable. Police said they are looking at the possibility that the owner violated South Korea's security law, under which praising North Korea can be punished by up to seven years in prison.
Full enforcement of the National Security Law has been rare in recent years as relations with North Korea have improved greatly since the Cold War era. In the past, military-backed governments in South Korea often used the security law to imprison and torture dissidents until the country achieved democracy in the late 1980s.
Many restaurants in South Korea sell North Korean-style cold noodles, dumplings and other food. Some refugees from North Korea also run restaurants featuring food from their hometowns. But none is believed to have portraits of Kim Il Sung and Kim Jong Il, the late grandfather and father of current leader Kim Jong Un, or a North Korean flag.
Portraits of the two Kims are at the core of North Korea's state-sponsored personality cult that buttresses the family's more than 70 years of authoritarian rule. Such portraits must be hung on the walls of all households and public offices in North Korea, and North Koreans are required to wear lapel pins bearing the images of the late leaders.
Despite the removal of the images, the restaurant's exterior still has socialist-style propaganda paintings with parodies of North Korean slogans such as "More booze to comrades" or "Let's bring about a great revolution in the development of side dishes."
It wasn't immediately clear whether the owner would remove those decorations as well. The owner hasn't expressed any intention of changing the restaurant's concept, according to a Seoul police officer who requested anonymity, citing department rules.
Both police and local officials refused to reveal details about the owner, citing privacy concerns. South Korea's Unification Ministry, which handles relations with North Korea, said it had no comment on the restaurant.
The restaurant is being built in Seoul's Hongdae neighborhood, a bustling area known for fancy bars and nightclubs. It's registered as an ordinary restaurant with the name of "Pyongyang Pub," according to local officials.
There used be a Japanese restaurant on the site, but it closed this summer after widespread public boycotts of Japanese products erupted as a result ofa bitter trade dispute between Seoul and Tokyo, according to South Korean media.
During a visit to the site on Monday, some residents expressed opposition to the restaurant, while others said they were curious about what it would be like once it opens. "I think it is too early to do this kind of thing (displaying portraits or the North Korean flag). But once this place opens for business I would come here purely out of curiosity," said Park So-hyun, a company employee.
Another citizen, Oh Sang-yeop, said, "I see they have taken down the portraits and flag, so I think it will be OK."
Associated Press video journalist Kim Yong Ho contributed to this report.