China has dispatched two marine surveillance ships to the East China Sea around the Diaoyu islands - known in Japan as the Senkaku islands - to "assert the country's sovereignty".
The move came just hours after Japan brushed off stern warnings by China on Tuesday, and bought the group of islands that both sides claim.
The growing dispute threatens to deepen tensions between Asia's two biggest economies.
The islands lie around 200km from Taiwan and 2,000km from Tokyo in a strategically important shipping area near rich fishing grounds and potentially huge maritime gas fields.
Taiwan has recalled its envoy from Japan in reaction to the mounting territorial row over the uninhabited islands.
Japan insists that it has only peaceful intentions behind the 2.05bn yen ($26.18m) purchase of the three islands in the East China Sea, until now leased by the government from a Japanese family that had owned them since early 1970s.
The developments came after the Japanese ambassador to Beijing was summoned to the foreign ministry to protest against Japan's decision to buy three of the islands.
Japan said the islands would formally fall under the remit of its Coast Guard.
Japan refused to confirm the presence of the Chinese vessels, but said it would deal with them "appropriately" if they come near.
Osamu Fujimura, Japan's chief cabinet secretary, said: "If they are indeed entering the waters around the Senkaku Islands, then we will demand they not cross over in to our territorial waters."
Speaking to Al Jazeera from Tokyo, Michael Penn, president of the Shingetsu News Agency, said that Japan's government acted to keep the issue under control.
"My understanding is that Prime Minister [Yoshihiko] Noda sees this as a way to actually moderate the issue," he said.
"The alternative to the government stepping in to nationalise the islands at this time was actually to let the city of Tokyo - with its very nationalist governor - take control. So I think that from Noda's point of view, this is a way of getting the issue under control, and to keep it from spinning out of control."
Wen Jiabao, the Chinese prime minister, says the islands are "an inherent part of China's territory" and has pledged his country will "never ever yield an inch" of its sovereignty.