An arbitration court has ruled China has no historic title over the waters of the South China Sea and breached the Philippines' sovereign rights with its actions, infuriating Beijing which dismissed the case as a farce.
A defiant China, which boycotted the hearings at the Permanent Court of Arbitration in The Hague, vowed again to ignore Tuesday's ruling and said its armed forces would defend its sovereignty and maritime interests.
China's state-run Xinhua news agency said shortly before the ruling, that a Chinese civilian aircraft successfully tested two new airports in the disputed Spratly Islands.
And China's Defence Ministry said a new guided missile destroyer was formally commissioned at a naval base on the southern island province of Hainan, which has responsibility for the South China Sea.
A statement from the office of Australia's Minister for Foreign Affairs Julie Bishop late on Tuesday said the ruling was "an important test for how the region can manage disputes peacefully" and reminded both nations "adherence to international law is the foundation for peace, stability and prosperity in East Asia".
Australia will continue to exercise freedom of navigation and overflight in the area, and supported the "right of others to do so", the statement said.
The United States, which China has accused of fuelling tensions and militarising the region with patrols and exercises, urged parties to comply with the legally binding ruling and avoid provocations.
US officials have previously said they feared China may respond to the ruling by declaring an air defence identification zone in the South China Sea, as it did in the East China Sea in 2013, or by stepping up its building and fortification of artificial islands.
China claims most of the energy-rich waters through which about $6.8 trillion in ship-borne trade passes every year.
Brunei, Malaysia, the Philippines, Taiwan and Vietnam also have claims.
China's Foreign Ministry rejected the ruling, saying its people had more than 2000 years of history in the South China Sea, that its islands did have exclusive economic zones and that it had announced to the world its "dotted line" map in 1948.
However, the ministry also repeated that China respected and upheld the freedom of navigation and overflight and that China was ready to keep resolving the disputes peacefully through talks with states directly concerned.
The ruling is significant as it is the first time that a legal challenge has been brought in the dispute, which covers some of the world's most promising oil and gas fields and vital fishing grounds.
It reflects the shifting balance of power in the 3.5 million sq km sea, where China has been expanding its presence by building artificial islands and dispatching patrol boats that keep Philippine fishing vessels away.
Japan said the ruling was legally binding and final.
The court has no power of enforcement, but a victory for the Philippines could spur Taiwan, Vietnam, Malaysia and Brunei to file similar cases.