The US, South Korea and Japan have all condemned the rocket launch, from the Musudan-ri base in the north-east of the communist country.
The Security Council approved a Japanese request for the emergency session, which began shortly after 1900 GMT.
They say it violates a Security Council resolution adopted in October 2006 which bans North Korea from carrying out ballistic missile activity.
Washington, Tokyo and Seoul regard the launch as a clear violation of Security Council resolution 1718 adopted in October 2006, which bans North Korea from carrying out ballistic missile activity.
But Zhang Yesui, China's envoy to the UN, said that the world should refrain from taking action that might lead to increased tension.
Correspondents say the likeliest outcome is a presidential statement - an official expression of the council's will, of which every line has to be agreed.
Any action by the Security Council should be "cautious and proportionate", he said.
The BBC's Kim Ghattas in Washington says that how the Security Council reacts will now determine Pyongyang's next move, whether it feels it has improved its negotiating position enough or can achieve even more by remaining defiant.
Japan's Ambassador to the UN, Yukio Takasu, said his country had requested the session because the launch represented "a direct threat to the security of Japan".
That the rocket did not fall on Japan does not "change the situation; that is [that North] Korea is raising tension and a threat on international peace and security", he said.
'Need for action'
The US, EU, Japan and South Korea criticised the launch, with US President Barack Obama urging Pyongyang to "refrain from further provocative actions".
"North Korea broke the rules once more by testing a rocket that could be used for a long-range missile," Mr Obama told a crowd in the Czech capital, Prague.
"This provocation underscores the need for action - not just this afternoon at the UN Security Council, but in our determination to prevent the spread of these weapons."
Later a joint US-EU statement urged Pyongyang to abandon its pursuit of weapons of mass destruction and "policy of threats aimed at its neighbours".
But our correspondent says no-one used the word condemnation and the statement dangled the prospect of international acceptance and economic development should North Korea give up its pursuit of nuclear and ballistic weapons.
Meanwhile Beijing has called for a measured international reaction.
"We hope relevant parties will remain calm and restrained, handle the situation properly, and together maintain peace and stability in the region," said foreign ministry spokeswoman Jiang Yu.
There are suggestions that China and Russia could use their vetoes if Western powers try to impose new sanctions on North Korea.
'No debris'
State media in North Korea said satellite "Kwangmyongsong-2" had been placed in orbit.
The satellite was transmitting data and the "Song of General Kim Il-sung" and "Song of General Kim Jong-il" - references to the late founder of North Korea and his son, the current leader - the report claimed.
But in a statement on its website later, the US Northern Command said North Korea had launched a three-stage long-range Taepodong-2 missile.
"Stage one of the missile fell into the Sea of Japan/East Sea. The remaining stages along with the payload itself landed in the Pacific Ocean," the statement said.
"No object entered orbit and no debris fell on Japan."
'Within reach'
North Korea gave prior warning of the launch and repeatedly said it was using it as part of the peaceful pursuit of a space programme, as is its right under international law.
