Korea raced to a 2-0 lead despite the efforts of GB goaltender Nicole Jackson, who made 35 saves in total.
Leanne Ganney scored her second goal of the tournament for GB before Kim Heewon ensured victory for the hosts.
Great Britain, who face North Korea on Wednesday, lost their opening match against the Netherlands on Sunday.
"It was a very good performance from the girls and we have got a lot to be proud of," GB head coach Cheryl Smith said.
Britain also play Slovenia and Australia in the group stage in Gangneung.
Great Britain Women suffered a 3-1 defeat by hosts South Korea in their second Group A game in the World Championship Division.