Foreign Ministry spokesman Geng Shuang said during a press briefing in Beijing on Wednesday that the sale was a violation of international law and international relations, as well as the One China policy - under which the US recognizes and has only formal ties with China and not Taiwan, Presstv Reported.
"China will take all necessary measures to safeguard our interests including imposing sanctions on the US companies participating in this arms sale to Taiwan," media outlets quoted Geng as saying.
The sale "is a serious interference in our internal affairs and undermines our sovereignty and security interests", the spokesman added.
China has also lodged diplomatic protests against the deal and called on the US to "cancel this arms sale plan at once, stop selling arms to Taiwan and cut its military contact with Taiwan."
This came a day after the US State Department approved the transfer of 66 Lockheed Martin-built F-16 fighter jets to Taiwan in an $8 billion deal, following another huge military hardware sale agreed just last month.
In a statement released on Tuesday, Secretary of State Mike Pompeo said that President Donald Trump had approved the proposed sale after Congress was notified last week. The F-16s "are deeply consistent with the arrangements, the historical relationship between the United States and China", Pompeo said.
"Our actions are consistent with past US policy. We are simply following through on the commitments we've made to all of the parties."
In a statement, the US Defense Security Cooperation Agency, which oversees American foreign military sales, also said Taiwan's purchase of the war planes "will not alter the basic military balance in the region."
"This proposed sale will contribute to the recipient's capability to provide for the defense of its airspace, regional security, and interoperability with the United States," the statement read.
Taiwan currently has a fleet of old-model F-16s purchased in 1992, which have undergone several crucial upgrades.
Manufacturer Lockheed Martin says the newest version, known as the F-16 Block 70/72, includes many avionics, weapons and radar technologies not in existence when earlier models were created.
China views Taiwan as part of its territory and has vowed to reunite the island with the mainland one day.
Almost all world countries recognize China's sovereignty under the policy known as One China.
The US, too, recognizes Chinese sovereignty over the island, but it has long courted Taipei in an attempt to counter Beijing.
The sale, which is approved at a particularly consequential time in US-China relations, is expected to further escalate tensions on an already bitter trade war.
Washington and Beijing face off in tough trade negotiations that economists say are hurting both of the superpowers, as well as dragging down the global economy.
Trump initiated a trade war with China last year, when he first imposed unusually heavy tariffs on imports from the country, seeking extensive structural changes from Beijing and alleging that it had engaged in intellectual property theft over many years, which China vehemently denies.