The benchmark Korea Composite Stock Price Index (Kospi) dipped 37.65 points, or 1.22 percent, to close at 3,060.27 points.
Trading volume was moderate at about 812 million shares worth some 15 trillion won ($12.7 billion), with losers outnumbering gainers 676 to 215.
Foreigners sold a net 659 billion won, while retail investors bought 961 billion won. Institutions offloaded a net 312 billion won.
Stocks opened steeply lower on an overnight plunge on Wall Street.
Overnight, the tech-heavy Nasdaq composite plummeted 2.83 percent and the S&P 500 dipped 2.04 percent. The Dow Jones Industrial Average retreated 1.63 percent.
Investor sentiment also weakened over growing concerns the US debt ceiling may lead to critical consequences.
"The US Treasury yields have steeply increased over the past seven sessions, pressuring the KOSPI," said Eugene Investment & Securities analyst Huh Jae-hwan.
South Korea's daily new COVID-19 cases surged to 2,885 on Wednesday, the second-highest tally since the outbreak of COVID-19 in January last year, as cases soared in the greater Seoul area.
Most large caps closed lower in Seoul.
Top cap Samsung Electronics lost 2.88 percent to 74,100 won, and No. 2 chipmaker SK hynix shed 3.38 percent to 100,000 won.
Internet portal operator Naver retreated 1.4 percent to 387,000 won, and leading chemical firm LG Chem declined 1.16 percent to 767,000 won.
Top automaker Hyundai Motor closed unchanged at 201,500 won, but pharmaceutical firm Samsung Biologics added 0.34 percent to 874,000 won.
The local currency closed at 1,181.8 won against the US dollar, up 2.6 won from the previous session's close. (Yonhap)