The US has confirmed plans to upgrade Taiwan's ageing fleet of F-16 US-built fighter planes.
China considers Taiwan part of its territory and has warned Washington not to proceed with the $5bn (£3bn) deal.
China's foreign ministry expressed his country's "strong indignation" over the move, saying it would damage ties.
But the US is legally bound to help Taiwan defend itself, and the move comes as China's military superiority over Taiwan has steadily increased.
China's Vice-Foreign Minister Zhang Zhijun called the decision "grave interference" in the country's internal affairs which sent a "gravely mistaken signal to pro-Taiwan independence separatist forces".
In a statement on the ministry's website, Mr Zhang said: "It must be pointed out that this wrongful course by the US side will unavoidably damage Sino-American relations and co-operation and exchanges in the military, security and other fields".