China's pursuit of offshore resources in parts of the South China Sea is "completely unlawful", US Secretary of State Mike Pompeo says.
He condemned Beijing's "campaign of bullying to control" disputed waters that are potentially energy-rich.
China, which has been building military bases on artificial islands in the area for years, said the US "deliberately distorts facts and international law".
The US has long opposed China's actions but not called them illegal until now.
Pompeo's comments come amid worsening relations between China and a number of other countries. It is unclear what new actions, if any, the US might take to back up its stance.
Brunei, Malaysia, the Philippines, Taiwan and Vietnam contest China's claim to almost all of the South China Sea. The countries have wrangled over territory for decades but tension has steadily increased in recent years.
Beijing claims an area known as the "nine-dash line" and has backed its claim with island-building and patrols, expanding its military presence there, although it insists its intentions are peaceful.
Although largely uninhabited, two island chains in the area may have reserves of natural resources around them. The sea is also a shipping route and has major fishing grounds.
In its annual defence review, Japan said China's naval activities were a matter of grave concern, accusing Beijing of trying to alter the status quo in the East and South China Seas.
What did Pompeo say?
In a statement on Monday, Pompeo denounced China's claims on the disputed Spratly Islands in the South China Sea, saying Beijing had "no legal grounds to unilaterally impose its will on the region".
He said the US, which has previously said it does not take sides in territorial disputes, rejected Beijing's claims to waters off Vietnam, Malaysia and Indonesia.
"Any [People's Republic of China] action to harass other states' fishing or hydrocarbon development in these waters - or to carry out such activities unilaterally - is unlawful," he said.
"The world will not allow Beijing to treat the South China Sea as its maritime empire."
How did China respond?
In a statement posted on Twitter, the Chinese embassy in Washington DC said the US state department "deliberately distorts the facts and international law including the United Nations Convention on the Law of the Sea".
It said America "exaggerates the situation in the region and attempts to sow discord between China and other littoral countries.
"The accusation is completely unjustified. The Chinese side is firmly opposed to it."
Pompeo said the US stood "with our South-East Asian allies and partners in protecting their sovereign rights to offshore resources," adding that this position was "consistent with their rights and obligations under international law".
What's behind the South China Sea dispute?
The sea has in recent years become a flashpoint for tensions between China and other nations which claim sovereignty over two largely uninhabited island chains, the Paracels and the Spratlys.
China claims the largest portion of territory, saying its rights go back centuries.
The US has long been critical of what it says is China's militarisation of the region and routinely angers Beijing with "freedom of navigation" missions.
In August 2018, a BBC team flew over the disputed South China Sea islands in a US military plane. In a radio communication, the pilots were warned to leave the area "immediately" in order to "avoid any misunderstanding".
Months earlier, China landed bombers in the disputed territory to take part in drills on islands and reefs.
China has previously accused the US Navy of provocation and interference in regional matters.