According to the policies, aircraft entering the zone must obey its rules or face "emergency defensive measures", informed china's chief defence agency.
Japan has lodged a protest over China's move. For decades, there were tensions between Japan and China over these islands.
Taiwan also claims the Diaoyu/Senkaku islands. They expressed concerns over national security. The countries have decided to step up defence in the region to tackle any emergency situation.
"Setting up such airspace unilaterally escalates the situations surrounding Senkaku islands and has danger of leading to an unexpected situation," Japan's foreign ministry said, reported BBC news.
However, a Chinese defence ministry spokesman, Yang Yujun, said China set up the area "with the aim of safeguarding state sovereignty, territorial land and air security, and maintaining flight order".
"It is not directed against any specific country or target," he said, adding that China "has always respected the freedom of over-flight in accordance with international law".
"Normal flights by international airliners in the East China Sea air-defence identification zone will not be affected in any way."
(With agency inputs)