The US Navy's Higgins and Antietam warships, a destroyer and cruiser respectively, entered China's territorial waters without permission and were met by the Chinese Navy, which "conducted verification and identification of US ships according to law and warned them to leave", the ministry said.
The U.S. military vessels carried out manoeuvring operations near Tree, Lincoln, Triton and Woody islands in the Paracels, one of the officials said.
China's Ministry of National Defense said the United States "seriously violated China's sovereignty" and undermined peace, security and mutual trust between the two nations and their militaries.
The objective of their sail-by was a speck of land called "Woody Island", where China has developed airstrips and port facilities in recent years as part of a broader strategy of establishing bases in these islands to demonstrate and exercise its political claims.
Washington has said it would like to see more global participation in its freedom of navigation operations in the South China Sea, through which about $5trn of ship-borne trade passes each year. Earlier in the month, the United States also formally protested the deployment of missiles and radar equipment on three artificial islands China has built in the Spratly Islands.
Called "Xisha" in Chinese, the islands have been incorporated into the southern province of Hainan and are being developed for tourism, as well as being equipped with weapon systems meant to enforce China's claim to virtually the entire South China Sea.
"We conduct routine and regular Freedom of Navigation Operations (FONOPs), as we have done in the past and will continue to do in the future", U.S. Pacific Fleet said in a statement. The island has hosted multi-role fighters, surface-to-air missiles, and anti-ship cruise missiles.More news: Ryan Reynolds Doesn't Think Disney/Fox Deal Will Affect X-Force
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Critics of the operations, known as a "freedom of navigation", have said that they have little impact on Chinese behavior and are largely symbolic.
China was invited to join the RIMPAC, which the Pentagon is the biggest military exercise in the world, under the Obama administration as a way to boost relations with Beijing and encourage the country to stop the militarization of a group of disputed islands in the South China Sea.
The two U.S. warships involved on Sunday were carrying out manoeuvre known as "freedom of navigation operations".
The Chinese Defense Ministry accused the USA of "provocation" and infringing upon China's sovereignty by conducting operations near the disputed Paracel Islands.
American warships will continue to be deployed in the region "on an everyday basis", Pentagon spokesman Lt. Col. Christopher Logan told the Russian media on Sunday.
The United States has said it would like to see more worldwide participation in freedom-of-navigation operations in the South China Sea.