Defence Minister Richard Marles said an Australian Seahawk helicopter was forced to take "evasive action" to prevent being hit by flares launched by a J-10 Chinese Air Force plane.
The flares were dropped about 300 meters in front of the chopper and about 60 meters above it.
"This is a very serious incident," Mr Marles said.
"It was unsafe and it is completely unacceptable.
"The consequence of being hit by the flares would have been significant."
The navy aircraft was taking a routine flight and operating from HMAS Hobart as part of an international effort to enforce UN sanctions on North Korea when the incident took place about 7.30pm last Saturday.
Mr Marles said the helicopter was unaffected and all the crew were safe.
The government has formally expressed concerns about the incident to Beijing.
"It is our expectation in the interaction of our two militaries is that they happen in a manner which is professional and safe for all concerned," Mr Marles said.
In November, Australian navy divers from HMAS Toowoomba were injured after a Chinese warship issued sonar pulses.Â
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