Six Chinese surveillance ships have entered waters near islands claimed by both Japan and China.
China said the ships were carrying out "law enforcement" to demonstrate its jurisdiction over the islands, known as Diaoyu in China and Senkaku in Japan.
The move came after Japan sealed a deal to buy three of the islands from their private Japanese owner, businessman Kunioki Kurihara, who used to rent them out to the Japanese state.
The islands were the focus of a major diplomatic row between Japan and China in 2010, the BBC reports.
Japanese Prime Minister Yoshihiko Noda has established a task force to address the issue, local reports said, and the Government also summoned the Chinese ambassador to lodge a protest.
"Dispatch of six ships is surely an unprecedented case, considering past incidents," Chief Cabinet Secretary Osamu Fujimura said.
The Chinese Foreign Ministry confirmed early on Friday that its ships were there.
"These law enforcement and patrol activities are aimed to demonstrate China's jurisdiction over the Diaoyu Islands and its affiliated islets and ensure the country's maritime interests," a statement said.
The Japanese coastguard later on Friday said the ships had moved out of waters around the disputed islands.
The US has called for ''cooler heads to prevail'' as tension intensifies between China and Japan over the islands, which lie south of Okinawa and north of Taiwan.
US Defence Secretary Leon Panetta is due to visit both Japan and China from this weekend as part of a tour of the region.
The dispute has seriously marred diplomatic relations between China and Japan and threatens to damage the strong trading relationship, the BBC reports.
The Japanese government purchase of the islands followed a bid by right-wing Tokyo Governor Shintaro Ishihara to buy the islands using public donations - an action that would likely have provoked China even more.
China says the islands have historically been its territory and fishing grounds.