China said Saturday it was suspending military exchanges and security talks with Washington and would impose sanctions on US firms involved in a 6.4 billion-dollar deal to sell arms to Taiwan.
A statement from the foreign ministry a day after Washington approved the sale said Beijing would also halt high level talks on arms control and non-proliferation.
"Cooperation between China and the US on key international and regional issues will also inevitably be affected," the ministry said.
"China will also implement relevant sanctions on US companies involved in the arms sales to Taiwan," it added.
The measures were announced a day after Washington approved the sale of an arms package that includes Patriot missiles, Black Hawk helicopters, and communications equipment for Taiwan's F-16 fleet.
The last US arms package for Taiwan, announced under previous president George W. Bush in October 2008, also led China to cut off military relations with the United States temporarily.
But this time the sanctions went further.
Defence ministry spokesman Huang Xueping said the measures reflected the "severe harm" the weapons deal presented.
"It runs counter to the principles of the joint statement issued during US President Barack Obama's visit to China in November," Huang told the official Xinhua news agency.
China considers Taiwan, where nationalists fled in 1949 after losing the mainland's civil war, a territory awaiting reunification, by force if necessary. It had warned Washington repeatedly against the arms sales.
Taiwanese President Ma Ying-jeou, on a flight home from a state visit to Central America, said the sales would help the island further develop ties with China.
"It will let Taiwan feel more confident and secure so we can have more interactions with China," Ma was quoted by Taiwan's Central News Agency as saying.
Taiwan's defense ministry was also upbeat, saying: "The defense ministry welcomes and thanks the US decision.... This would enable Taiwan to be more confident in seeking reconciliation with China and help peace and stability in the Taiwan Strait."
"The various defensive weapons provided by the US will also facilitate the transformation and modernization of our national defense," the Taiwanese ministry said.
In Beijing, however, the deal's approval set in motion a flurry of angry activity.
Chinese Vice Foreign Minister He Yafei made an urgent official protest to the US ambassador in Beijing, Jon Huntsman, Chinese officials told AFP.
The Chinese defense ministry also summoned the US Embassy's defense attache on Saturday afternoon to notify Washington military ties had been suspended, Xinhua reported.
In the statement delivered to Huntsman, He urged Washington to cancel the deal, which he said would "inevitably damage China-US relations... causing results that both sides do not want to see".
The deal constituted "crude interference in China's internal affairs that seriously endangers China's national security and damages China's peaceful reunification", He said.
The sale marks Obama's most divisive act in China-US relations, after devoting his first year to broadening ties with Beijing despite discord on areas such as trade, human rights, Internet censorship and climate change.
The United States since 1979 has recognized Beijing as China's sole government. But Congress at the same time required the United States to sell Taiwan weapons for its self-defense.
Beijing argued again on Saturday that the arms sales violated the US commitment to Beijing's "One China policy".
Analysts said China this time could retaliate by refusing to support sanctions on Iran, a key US priority. US Secretary of State Hillary Clinton appealed to Beijing on Iran's nuclear program in remarks in Paris hours before the Taiwan sale was announced.