The Paracel Islands have been controlled by China since 1974 but they are also claimed by Vietnam and Taiwan.
The Chinese spokesperson said the U.S. warship violated Chinese and global laws and seriously threatened China's sovereignty and security.
Chinese Foreign Ministry spokesperson at a news briefing in Beijing today said a guided missile destroyer intrusion in its territorial water is the violation of global laws and damaged China's sovereignty. The Chinese military will further strengthen its naval and air defense capability to safeguard its sovereignty and security, the ministry said.
Following Tuesday's event, the ministry said the USA had "infringed upon China's sovereignty and security, harmed mutual trust between the two armies as well as regional stability".
"China will continue to take resolute measures to protect Chinese sovereign territory and maritime interests".
"It is a critical stage for the development of the relationship between Chinese and American armies, and we demand the United States side earnestly take steps to correct its mistakes", the ministry said.
U.S. President Donald Trump will makes his first visit to Asia as president next month. The warship allegedly carried out a "freedom of navigation" operation near the islands, according to an exclusive report by Reuters.
US defense officials, speaking on condition of anonymity, told Reuters that the USS Chafee carried out normal maneuvering operations that challenged "excessive maritime claims" near the Paracel Islands.
Beijing condemned the mission of the guided-missile destroyer USS 'Chafee, ' which on Tuesday sailed within 16 nautical miles of the disputed Paracel Islands in the South China Sea, within the framework of a so-called "freedom of navigation" operation. China is North Korea's neighbor and biggest trading partner.
China claims the South China Sea and its islands virtually in their entirety. "China is firmly opposed to that and has lodged stern representations with the United States".