The flashpoint islands -- called Senkaku in Japan and known in China as the Diaoyus -- are a point of ongoing tension between Tokyo and Beijing.
On Friday, two Chinese ships chased away a Japanese fishing boat in the waters, before the Japan Coast Guard in turn ordered the Chinese vessels to leave.
Several patrol ships from the Japan Coast Guard were deployed to safeguard the fishing boat, a spokesman told AFP on Sunday.
But Beijing said Monday that the fishing boat was "illegally operating...in China's territorial waters."
Foreign ministry spokesman Zhao Lijian said the Chinese Coast Guard "tracked and monitored" the boat, asked it to leave, and then "resolutely responded to the illegal interference of the Japanese Coast Guard vessel."
China lodged "solemn representations" with Japan over the incident, he said.
"I would like to stress that the Diaoyu island and its affiliated islands are China's inherent territory," said Zhao.
"It is China's inherent right to conduct patrol and law enforcement in waters off the Diaoyu island."
Tokyo also lodged an official protest with Beijing over the incident, Japanese media reported.
The Japanese government has long complained about China's routine dispatch of its coast guard ships to waters surrounding the islands.
Relations between Japan and China deteriorated in 2012 when Tokyo "nationalised" some of the disputed islets and tensions still flare up over the issue.
Zhao said Tokyo should "avoid creating new incidents on the Diaoyu Islands issue" in the future.
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