The United States says it expects to have "very serious" talks with China after reports the Chinese deployed an advanced surface-to-air missile system to a disputed island.
It is a centuries-old territorial dispute that is testing regional leaders once again.
Reports of China deploying a missile system on a disputed South China Sea island have sent shock waves over the ASEAN summit in the United States.
US president Barack Obama has called on the countries of ASEAN, or the Association of South-East Asian Nations, to remain calm.
But US Secretary of State John Kerry says the issue of militarisation in the South China Sea is a serious matter for discussion.
"The standard that should be applied to all countries with respect to the South China Sea is no militarisation. When President Xi was here in Washington, he stood in the Rose Garden with President Obama and said China will not militarise in the South China Sea. But there is every evidence every day that there has been an increase of militarisation of one kind or another. It's of serious concern. We've had these conversations with the Chinese, and I'm confident that, over the next days, we will have further, very serious conversation on this."
A spokesman for China's foreign ministry, Hong Lei, says China welcomes the US and ASEAN's position on non-militarisation.
But he also suggested the United States' involvement in the regional dispute is not welcome.
"Countries outside the region should not flex their military muscles in the South China Sea and should not entice regional countries to carry out joint military exercises or patrol activities targeting a third party. The United States is not in the South China Sea. They should speak and act cautiously on this issue. They should support countries to resolve the disputes through peaceful negotiations rather than hype up the issue, exaggerate regional tensions and alienate relations among the regional countries."
The deployment of the missiles on Woody Island is part of the Paracel chain, in the north of the South China Sea.
The Paracels are under Chinese control, but Vietnam and Taiwan also claim them.
Vietnam's prime minister has called on the United States to play a greater role in preventing activities aimed at changing the status quo in the region.
Taiwan's president, Tsai Ing Wen, has called for a peaceful resolution to the matter.
"It is a comparably tense situation. So we call on all sides to stick to the principle of resolving the dispute over the South China Sea in a peaceful manner. Self-restraint is most important."
Japan, Malaysia, Brunei and the Philippines also have competing territorial and jurisdictional claims on other parts and islands in the South China Sea.
The area is valued because of its potentially extensive reserves of oil and gas, as well as its role as a major shipping lane.
Each year, more than $5 trillion worth of trade passes through the South China Sea, and US trade accounts for more than $1 trillion of that total.
US ally Japan has also expressed its concern about China's latest activity.
Chief Cabinet Secretary Yoshihide Suga says the missiles are just the latest in a series of attempts by China to stake its claim in the disputed region.
"It is a common concern of the international community that China tries to change the situation and increase tensions in the South China Sea by carrying out extensive and rapid land reclamation, building its base in the region and utilising it for military purposes. We have deep concerns over such actions and want to re-emphasise that Japan cannot allow this."
Earlier, China's foreign minister, Wang Yi, said the reports of missiles were a Western media invention.
But satellite images taken earlier this week appear to show two batteries of eight missile launchers and a radar system on Woody Island.
It is not the first deployment of advanced military technology to Woody Island.
In November, photos showed Chinese fighter jets landing on a newly constructed runway.
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