Asean Secretary-General Surin Pitsuwan told Reuters news agency that Beijing’s plan was “a very serious turn of events”.
On Thursday China said that it granted its border patrol police the power to board and search ships in the area.
The Philippines, Vietnam, Malaysia, Brunei and Taiwan also claim parts of the region.
State media said patrols in the southern island province of Hainan would be able to board foreign ships that stopped in its waters or violated other regulations.
The regulation allows police “to board, seize and expel foreign ships illegally entering the province’s sea areas,” the Global Times newspaper said on Wednesday.
These activities include “illegal landing” and “carrying out publicity campaigns that endanger China’s national security”, it added.
Analysts say patrols have so far been restricted to chasing off intruding foreign vessels.
“My reaction is [this is] certainly an escalation of the tension that has already been building. And it is a very serious turn of events,” Mr Pitsuwan, head of the Association of South East Asian Nations’ (Asean), told Reuters.
“The problem is that you can stake the claim, you can initiate measures and policies but there is that potential of misunderstanding, miscalculation that could lead to major tension and major incidents,” he added.
China’s announcement comes amid an ongoing row over a map on new Chinese passports show disputed areas in the South China Sea as Chinese territory.
Vietnam, the Philippines, and Taiwan have already complained to China, saying the map on the new passport is an infringement of their sovereignty.
Vietnam and the Philippines have also refused to stamp the new Chinese passports and are instead issuing visas on separate sheets of paper.