US Secretary of State Mike Pompeo threatened that Washington will impose sanctions on any individual or entity that “materially contributes to the supply, sale, or transfer of conventional arms to or from Iran”.
China's Foreign Ministry said Pompeo's remarks were "utterly unjustifiable."
"It is the US that peddles arms and ammunition everywhere, uses military trade to serve geopolitical interests, and even openly interferes in the internal affairs of other countries," Foreign Ministry spokesman Zhao Lijian told reporters, according to AFP.
Asked if China would now sell arms to Iran, Zhao did not directly address the issue but said Beijing would "handle military trade in accordance with its military export policy and its international obligations".
The embargo on the sale of conventional arms to Iran began expiring progressively from October 18 under terms of the UN resolution that confirmed the 2015 nuclear deal between Tehran and world powers.
Tehran, which can now purchase weapons from Russia, China and elsewhere, has hailed the expiration as a diplomatic victory over the United States, which suffered a humiliating setback at the UN Security Council when it tried to maintain an indefinite freeze on arms sales.
President Donald Trump withdrew the United States from the nuclear deal in 2018 and unilaterally reimposed sanctions on Iran.
China, Iran's primary trading partner, has long criticized the United States over exacerbating tensions by pulling out of the deal.
Iran's foreign minister traveled to Beijing this month for talks spanning trade and defense.