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4 year oldMr Kim still maintains "absolute authority", but handed various policy areas to others to reduce his stress levels, the spy agency reportedly said.
Ms Kim is now "steering overall state affairs", the National Intelligence Service added.
However, Seoul's spy agency has been wrong about North Korea in the past.
The claims were reportedly made during a closed-door briefing on Thursday to South Korea's National Assembly.
Lawmakers then discussed the assessment with journalists.
"Kim Jong-un is still maintaining his absolute authority, but some of it has been handed over little by little," the agency was quoted as saying.
Ms Kim now has responsibility for Pyongyang's policy towards the US and South Korea, among other policy issues, and is "the de-facto number two leader," it added, although it stressed that Mr Kim had "not selected a successor."
Mr Kim's decision to delegate was in part to "relieve stress from his reign and avert culpability in the event of policy failure," it said.
However, some analysts have been sceptical of the intelligence, with website NKNews noting that she appeared to have missed two important meetings this month, leading to speculation from some observers that she may have been demoted.
She is the younger sister of Kim Jong-un and the only one of his siblings considered a close and powerful ally.
Born in 1987, she is four years younger than Mr Kim. The two of them lived and studied in Bern, Switzerland, at the same time.
Ms Kim first gained international attention in 2018, when she was the first member of the Kim dynasty to visit South Korea. She was part of the delegation to the Winter Olympics, where North and South competed as a joint team.
She also worked alongside her brother at international summits, including his meetings with South Korean President Moon Jae-in, China's Xi Jinping and US President Donald Trump.
There's no doubt Kim Yo-jong is on the rise.
Some analysts believe the crisis earlier this year between North and South Korea which saw the inter-Korean liaison office blown to bits was manufactured just to give her a major platform.
She issued her first public statement in March. It was a scathing verbal attack condemning the South. She later noted that she had been given "power authorised by the Supreme Leader, our Party and the state".
She also wrote about the potential for a summit between Kim Jong-un and President Trump later this year, insisting that North Korea did not have the "slightest intention to pose a threat to the US".
All of which suggests she may have been given responsibility to influence policies toward the United States and South Korea.
Let's caveat this a little. This does not mean she will succeed her brother as leader of North Korea. She is also not the only one to have been given extra responsibilities. Other aides have been handed some power too.
It is also worth noting that the intelligence briefing specifically states that Kim Jong Un remains in overall control - he is merely delegating. He will still have the final say.
But it is yet another indication that Kim Yo-jong has gone from hiding behind pillars at public events and carrying ashtrays for her brother to being at the forefront of North Korea's foreign policy.
North Korea is one of the world's most secretive societies.
South Korea's National Intelligence Service may have more intelligence on the North than most other organisations, but it has still had a mixed record.
For example, in 2016, South Korean media cited a similar briefing by the spy agency in which it was said that the chief of staff of the North Korean army, Ri Yong-gil, had been executed.
Three months later, the South Korean government said that he appeared to be alive, as his name had appeared on a list of party officials.
In 2017, the spy agency also admitted it tried to manipulate the result of the 2012 presidential election in the South.
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