His comments come against a backdrop of heightened tension between China, Asia's biggest economy, and its neighbors in the South China Seas.
In a blunt warning to Beijing, Hagel told the gathering of military and government officials that while the U.S. had "no position on territorial claims," it was committed to the freedom of navigation and flights over the South China Sea.
"The United States will not look the other way when fundamental principles of the international order are being challenged," he said.
Calling the South China Sea "the beating heart of the Asia-Pacific and a crossroads for the global economy," Hagel said there was a need to establish a cooperative regional architecture and resolve disputes peacefully.
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He pledged to enhance the defense capabilities of America's regional allies.
China claims almost all of the South China Seas, an area rich in oil and gas, and dismisses rival claims from Taiwan, Brunei, Vietnam, the Philippines and Malaysia.
It is also involved in a territorial spat with Japan over islands in the East China Sea.
Tensions in the past few weeks in particular have soared after China installed an oil rig in waters claimed by Vietnam, sparking anti-China riots in Vietnam's industrial zones.
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The Philippines has said Beijing could be building an airstrip on a disputed island, according to a Reuters report.