US officials said that China might be considering an amphibious landing on one of Taiwan's uninhabited islands, or a clash in the air.
For the past week jet fighters from China and Taiwan have been flying close to each other over the 100 mile-wide strait which separates them.
The US has two aircraft-carrier battle groups on patrol near the flashpoint, and the commander of one, Rear Admiral Timothy Keating, said the navy would respond to any aggressive action by China.
"China will know if they attempt to undertake any kind of operation, whether it's Taiwan or anything, that they are going to have the US navy to deal with," he added.
The increase in tension follows remarks by the Taiwanese president, Lee Teng-hui, suggesting that negotiations between Taipei and Beijing should take place on a "state to state" basis, implying Taiwan is a separate entity.
But China considers Taiwan a renegade province, a view dating back to 1949, when Chiang Kai-Shek's nationalist forces retreated there after defeat by the Communists.
US policy has always been to restrain Taipei from trying to break away. Beijing has always said it would invade if Taiwan declared independence.
Meanwhile a Taipei newspaper, the China Times Express, quoted sources in Taiwan as saying that US fighter jets had been practising combat flying near Taiwanese airspace as a deterrent against possible Chinese actions.
The US is required by its own 1979 Taiwan relations act to sell the island defensive weapons and treat any threat with concern. But the act is vaguely worded in respect of US obligations in the event of direct attack.
Admiral Keating said the proximity of the two battle groups to Taiwan was a coincidence and was not a response to Chinese sabre-rattling.
But according to US reports, Chinese diplomats in Washington have warned the White House via US sinologists that Beijing may be obliged to take military action.
An unnamed US official quoted in the New York Times yesterday said that Washington was preparing for "contingencies" in the strait, but did not elaborate.
The last time the US had such a significant military presence in the region was in 1996, when China fired missiles near Taiwan.
Last week the US announced that it was to sell $500m (£310m) of military equipment to Taiwan.
Wen Wei Po, a Beijing-funded Communist party newspaper in Hong Kong, said the military situation was "a lot more serious than what the outside world was aware of". It said China had identified 200 key military targets on Taiwan.
The Global Times tabloid in Beijing said a military conflict could erupt at any moment.
Military analysts say China's military options include a partial blockade, the seizure of Taiwanese supply ships, air incursions by Chinese fighter jets, or stepped-up sea incursions by fishing boats, submarines or battle ships.
State department officials say, however, that the warnings of imminent military action may be intended to gauge US reaction and persuade Washington to apply pressure on Taipei to stop all talk of independence.
The state department believes it is unlikely that Beijing would launch an assault before a meeting due to be held between President Clinton and President Jiang Zemin in New Zealand in mid-September .
The Chinese embassy did not return telephone calls about the issue yesterday.
