Australia said that its Poseidon surveillance plane was approached by a Chinese fighter jet during a Sunday patrol over the disputed South China Sea.
The Chinese jet released flares in "close proximity" to the Australian aircraft, endangering the crew onboard, the defence department said.
China's military said Monday it had taken "effective countermeasures", accusing the Australian aircraft of having "illegally intruded" into Chinese airspace over the Xisha Islands, using Beijing's name for the Paracel Islands.
It was the latest in a string of episodes between China and Australia in the increasingly contested airspace and shipping lanes of Asia.
Beijing's defence ministry chimed in on Wednesday, bashing Australia's statement, which it said "distorts right and wrong, shifts the blame on China and attempts in vain to cover up the vile and illegal intrusion".
"We are strongly dissatisfied with this and have raised a stern protest with the Australian side," said the online statement attributed to spokesman Jiang Bin.
Jiang said Canberra had "falsely accused" China of taking unsafe actions during the mid-air encounter.
"This fallacy is completely untenable," he said.
"We urge Australia to immediately cease its infringing, provocative and hype-mongering actions."
Jiang added that China's military would "continue to take necessary measures to resolutely safeguard national sovereignty".
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