The Royal Navy said HMS Albion complied with worldwide law and norms in her sail past and exercised her freedom of navigation rights in full.
The Royal Navy said the warship sailed past the islands en route to Ho Chi Minh City, Vietnam, to demonstrate its "freedom of navigation" rights and challenge Beijing's "excessive claims" in the region.
Beijing media also reported that People's Liberation Army seamen stationed on the islands scrambled a frigate and two helicopters to monitor and intercept the British warship and warned it to stay away from what it claimed to be China's sea border on August 31.
While having the choice to steer clear of the Paracel Islands, Captain Tim Neild reportedly chose to demonstrate the UK's objection to China's "excessive claims" in the region, an anonymous source Reuters.
China's definition of the 12-mile limit around the islands is not the same as those limits which have been internationally recognised.
China's territorial claims in the South China Sea have always been a source of dispute, with Vietnam, the Philippines, Taiwan, Malaysia and Brunei all contesting its actions.
China's foreign ministry said HMS Albion, an amphibious assault ship, entered the area on August 31, sailing close to the Paracel Island chain, known as Xisha in Chinese.
Hua then went on to say China is firmly opposed to this manoeuvre and has expressed its strong dissatisfaction to the British.
It said Beijing urged the United Kingdom to "immediately stop such provocative actions, to avoid harming the broader picture of bilateral relations and regional peace and stability".
However, some countries outside the region ignore this positive trend, dispatch planes and ships to stir up trouble in the region and disturb peace and security, he said, adding that the Chinese military will take all necessary measures to resolutely defend national security and sovereignty.
HMS Albion's recent challenge comes after the United States said it would like to see more global participation in such actions.
It followed warnings to China by US Secretary of Defence, James Mattis, of "consequences" if it continued to militarise the South China Sea.
"The Chinese Navy verified and identified the warship according to law and warned it to leave".
Last month, the UK Defence Secretary Gavin Williamson gave a speech in Washington in which he said China needed to recognise and abide by worldwide norms.
Last June, the Royal Navy and the French Navy ("Marine Nationale") said it will join the U.S. Navy in patrolling the disputed South China Sea.
Tension have risen over Beijing's South China Sea development where it has reclaimed reefs and islands and built runways, hangars and missile systems. Beijing has repeatedly rejected the ruling and earlier refused to participate in the case brought by the Philippines.