The operation was the latest attempt to counter what Washington sees as the country's efforts to limit freedom of navigation in the strategic waters.
The ministry said the Chinese military issued warnings to guided-missile cruiser USS Antietam and the USS Higgins to leave the waters after they "arbitrarily entered" the contested Paracel Islands in the waterway "without permission of the Chinese government".
The two ships passed within 12 miles of four islands - Tree, Lincoln, Triton and Woody - according to a USA defence official.
But on this occasion it came amidst a period of heightened tensions between Washington and Beijing, headlined by an ongoing trade dispute and the cancellation of a summit between Donald Trump and North Korean leader Kim Jong Un.
The U.S. military has a long-standing position that its operations are carried out throughout the world, including in areas claimed by allies, and that they are separate from political considerations.
The move prompted immediate criticism from the U.S., which last week pulled its invitation to China to join maritime exercises in the Pacific because of Beijing's "continued militarisation" of the South China Sea.
The U.S. military did not directly comment on Sunday's operation, but said U.S. forces operate in the region daily.
'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, ' US Pacific Fleet said in a statement.More news: Fiat Chrysler recalls 4.8 million vehicles, tells drivers don't use cruise control
More news: NFL Used Polling Firm to Ask Public If Kaepernick Should Be Signed
More news: Abortion referendum: Ireland on brink of history as ‘No’ campaign concedes defeat
"Chinese military took immediate actions by dispatching naval ships and aircrafts to conduct legal identification and verification of the USA warships and warn them off", Wu Qian, defense ministry spokesman, 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.
China's foreign minister said China had a right to take whatever measures it deemed fit on its island holdings, and the defence ministry criticized the USA move as "unconstructive", saying it would do nothing to change China's resolve to "play a role in maintaining peace and stability in the Asia-Pacific region".
Foreign Secretary Alan Peter Cayetano provided on Monday more details of what President Rodrigo Duterte's administration has been doing to defend the country's sovereignty in the disputed region amid criticism that it has been far too soft on China.
China now asserts its right to the islands.
China has accused Washington of viewing Beijing in "Cold War" terms.
Satellite photo dated March 28, 2018 shows Woody Island. The operations, which the Obama administration curtailed somewhat but which picked up again under US President Donald Trump, are meant to exercise what the United States says are its rights under global law.