China, which claims democratic Taiwan as its own, has stepped up military exercises near the island, in what Taipei views as intimidation to force it to accept Chinese rule.
Yeh Kuo-hui, from Taiwan's Defence Ministry's operations and planning department, told a hastily arranged news conference that China's intentions could not be predicted.
"We must make all preparations for war readiness," Yeh said, following a news briefing from senior officers describing the Chinese activities over the last two days, and showing a map of Chinese movements.
The drills took place in Taiwan's air defence identification zone, between mainland Taiwan and the Taiwan-controlled Pratas Islands, the ministry said. Taiwan says China sent advanced Su-30 and J-10 fighters to participate.
Taiwan Deputy Defence Minister Chang Che-ping said the drills threatened regional stability and endangered international aviation.
"We once again say, do not underestimate the military's determination to defend our home. We are confident and capable of defending the country," Chang said.
Taiwan's Foreign Ministry said the government had shared "information related to China's threat to key friendly nations", a likely reference to the United States, Taiwan's main arms supplier and most important international backer.
The Pentagon said it was closely monitoring the military exercise.
"The PLA activities in question are merely the latest in a string of destabilizing PLA actions aimed at both Taiwan and the broader region intended to intimidate and which increase the risk of miscalculation," the Pentagon statement said, using an acronym for China's People's Liberation Army.
China's Defence Ministry did not respond to a request for comment. China has held numerous military exercises up and down its coast and near the island in recent weeks.
Taiwan this week has been carrying out live-fire weapons tests off its southeast and eastern coast.
Taiwan President Tsai Ing-wen has warned of a rising risk of accidental conflict, saying communication must be maintained to cut the risk of miscalculation.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.