China, they said, was rapidly expanding its nuclear arsenal, was “opaque” about its military modernisation and was co-operating militarily with Russia.
Nato chief Jens Stoltenberg warned China was “coming closer” to Nato in military and technological terms.
But he stressed the alliance did not want a new Cold War with China.
Nato is a powerful political and military alliance between 30 European and North American countries. It was established after World War Two in response to the threat of communist expansion.
In a statement on Twitter, China’s Mission to the EU accused Nato of “slandering China’s peaceful development”, and insisted that China was committed to a defence policy that is defensive in nature”.
“China will not present ‘systematic challenges’ to anyone, but we will not sit by and do nothing if ‘systematic challenges’ come closer to us,” it added.
In recent years, the Nato alliance came under strain as leaders debated its purpose and funding.
Tensions grew during the presidency of Donald Trump, who complained about his country’s financial contributions to the alliance and questioned the US commitment to defend European partners.
It is his successor Joe Biden’s first Nato meeting since taking office, and the new president has sought to reassert American backing for the 72-year-old alliance.
Mr Biden said Nato was critically important for “US interests” and the alliance had a “sacred obligation” to observe Article 5 of its founding treaty, which commits members to defend each other from attack.
Asked about his forthcoming summit with Vladimir Putin in Geneva on Wednesday, he described the Russian president as a “worthy adversary”.
In another development, the Nato leaders also agreed to pay to keep Kabul airport running in Afghanistan, as the US and its allies withdraw troops from the country.
Alliance member Turkey has offered to guard and operate the airport after troops leave.