Foreign Minister Julie Bishop has warned of tension and mistrust amid reports China has installed weapons on all seven of its artificial islands in the disputed South China Sea.
A US think tank has been tracking developments with satellite images and is confident in its assessment Beijing has deployed anti- aircraft and anti-missiles systems on the islands.
Ms Bishop, without naming China specifically, on Thursday urged countries with competing claims in the disputed maritime territory to refrain from "coercive behaviour and unilateral actions".
"The building of artificial islands and the possible militarisation is creating an environment of tension and mistrust between claimants and other regional states," Ms Bishop said in a statement.
"This is not in the interest of any state and will lead to reputation and other costs for claimants engaging in such behaviour."
Greg Poling, who is director of the Centre for Strategic and International Studies' Asia Maritime Transparency Initiative, said the appearance of anti-aircraft and close-in weapons systems emplacements was significant and could be seen as "prepping for a future conflict".
"This is militarisation," he told Reuters.
"They (China) keep saying they are not militarising but they could deploy fighter jets and surface-to-air missiles tomorrow if they wanted to."
China insists the situation in the South China Sea has stabilised and is improving.
The South China Sea dispute involves overlapping claims between the Philippines, China, Vietnam, Malaysia, Brunei and Taiwan.
