Disappointing data over the weekend also weighed on sentiment. Profits of Chinese industrial companies rose an annual 6.3 percent in June, much lower than May's 15.5 percent reading. The weak figures follow HSBC's flash purchasing managers index, which showed manufacturing activity slowing to an 11-month low in July.
"We believe worries of a hard landing in China are overblown because Beijing still can, and will, use some mild stimulus to put a floor under the slowdown," wrote economists at HSBC in a research note.
A rally in solar stocks lent some support to the index after Beijing and the European Commission resolved a dispute over alleged Chinese dumping of solar panels in Europe. Shenzhen Topray Solar added 10 percent, while Shanghai Chaori Solar jumped 5 percent.
Australian resource stocks fell after copper prices hit a three-week low. Mount Gibson and Atlas Iron lost 2.7 and 4.7 percent, respectively.
Shares of miner Oz Minerals fell 2 percent after forecasting a write-down of $185 million to first-half profit as a result of falling commodity prices.
But gains in banking stocks capped heavier losses on the index. Westpac led gains by 1 percent as optimism grew for an interest-rate cut at next week's Reserve Bank of Australia (RBA) policy review.
"The market is currently pricing a 78 percent chance of a rate cut early in August and all focus will be on any policy related comments at RBA Governor Glen Stevens's speech on Tuesday," wrote analysts at National Australia Bank in a report.
Kospi slips 0.6%
South Korea's benchmark index closed at its lowest level in four sessions thanks to a a 1.5 percent fall in market heavyweight Samsung Electronics.
Sentiment was also hurt after data from the Bank of Korea showed that domestic manufactures were more pessimistic about the outlook for August than they were for July.
In earnings news, Lotte Chemical tanked 3 percent despite reporting a rise in second-quarter profit after last year's net loss.
— By CNBC.com's Nyshka Chandran. Follow her on Twitter