An unidentified Chinese warship demanded that an Indian naval vessel identify itself and explain its presence in South China Sea waters off Vietnam in July, the Financial Times said on Thursday.
The London-based newspaper reported that five people familiar with the incident said it occurred in international waters shortly after India's amphibious assault ship INS Airavat completed a scheduled port call in Vietnam.
It is the latest in a series of actions this year that have caused concern about Beijing's maritime assertiveness among regional nations - particularly Vietnam and the Philippines.
China says it has sovereignty over essentially all of the South China Sea, a key global trading route, where its professed ownership of the potentially oil-rich Spratly archipelago overlaps with claims by Vietnam, the Philippines, Taiwan, Brunei and Malaysia.
Vietnam and China have a separate long-standing dispute over the more northerly Paracels archipelago.
The INS Airavat visited Nha Trang in south-central Vietnam and the northern port of Haiphong in the second half of July.
"Something did happen," one source familiar with the incident told AFP, adding it was unclear exactly how far off Vietnam's coast it occurred.
"This is a typical Chinese approach," said the source, adding that Chinese enforcement vessels try to assert 'that this is their territory and what are you doing in their territory?'.
Vietnam's foreign ministry could not immediately respond to a request for comment, and the Indian ambassador in Hanoi was out of the country.
In recent months, the Philippines and Vietnam have objected to what they said was Chinese harassment of oil exploration vessels and fishermen in the South China Sea.
US Secretary of State Hillary Clinton in July condemned acts of 'intimidation' in the waters, where it says it has a national interest in free navigation.
A Pentagon report on Wednesday last week said China is increasingly focused on naval power, as it places a growing priority on securing strategic shipping lanes and mineral-rich areas in the South China Sea.
Chinese leaders have insisted their military modernisation programme is aimed solely at 'self-defence'.