China's Foreign Ministry announced Friday it is revoking the license for the U.S. consulate general in the southwestern city of Chengdu.
The ministry also ordered the consulate general to cease operations.
"The current situation between China and the U.S. is something the Chinese side does not want to see," the foreign ministry said in a Chinese-language statement translated by CNBC.
"The responsibility lies entirely with the U.S. side," the statement added. "We again urge the U.S. side to immediately revoke its relevant wrong decisions, to create necessary conditions for the two countries' relationship to return to normal."
The U.S. Embassy in Beijing declined to comment.
The Chengdu consular district covers the autonomous region of Tibet, the municipality of Chongqing, and the provinces of Sichuan, Yunnan and Guizhou, according to the consulate's website.
The announcement comes after the U.S. ordered China to close its consulate in Houston. State Department spokesperson Morgan Ortagus said the directive to close the consulate was made to protect American intellectual property and the private information of its citizens. Beijing had condemned the decision and warned of firm countermeasures.
The consulates in Chengdu and Houston had comparable status, Eurasia Group's Michael Hirson told CNBC "Street Signs Asia" earlier Friday. "If they were to choose an important but still secondary consulate like Chengdu or Shenyang, that would be in keeping with the role that the Houston consulate serves," he said.
Hirson, who is practice head for China and Northeast Asia at Eurasia Group, said targeting the consulates in Shanghai or Guangzhou "would be a notch above Houston."
"If they were to close the Hong Kong consulate, that would be then thrusting this dispute into what's already very serious impasse of course with the future of Hong Kong and Hong Kong's autonomy," he said. "So I think that would be the most escalatory move in terms of closing the consulate."
Mainland Chinese stocks led losses in the Asia Pacific region during Friday trade, as U.S.-China tensions hit investor sentiment.
The Chengdu consulate, established in 1985, is one of five the U.S. has in mainland China, in addition to the embassy in Beijing.
About three-fourths of the roughly 200-person Chengdu consulate staff are Chinese, according to the consular website.
— CNBC's Sam Meredith and Yen Nee Lee contributed to this report.