The incident took place in the Sikkim sector, where the two countries were engaged in a stand-off June 16 to August 28, close to the India-China-Bhutan tri-junction.
The possibility of the unmanned aerial vehicle (UAV) being shot down or electronically taken over can not be ruled out, sources said.
Zhang Shuili, deputy head of the combat bureau of the Western Theatre Command's joint staff department, said the incident took place in "recent days" but did not provide an exact location.
China's defense ministry expressed its "dissatisfaction and opposition" yesterday over the crash of an Indian unmanned aerial vehicle inside Chinese territory, the latest in a series of border incidents between the regional rivals.
"An Indian UAV which was on a regular training mission inside the Indian territory lost contact with the ground control due to some technical problem and crossed over the [Line of Actual Control] in the Sikkim Sector".
However, there was no immediate response from the Indian Defence Ministry.
Geng, in an apparent reference to the 1890 China-British Treaty, said: "I want to point out that the Sikkim section of the China-India border has been delimited". "China's border troops have conducted identification and verification of the vehicle", he said, adding, "We will defend China's sovereignty and security resolutely".
While the precise area of the incident remains unclear, with neither side offering precise details, the Sikkim sector of the India-China border in the east has been a hotspot between the two sides.
Army spokesperson Col Aman Anand said the incident was being investigated.
In November, China criticized a visit by Indian President Ram Nath Kovind to the remote state of Arunachal Pradesh, which China claims, saying China opposed any activities by Indian leaders in disputed areas.
The UAV incident comes ahead of a trilateral meeting between the foreign ministers of India, China, and Russian Federation next week in New Delhi.
Chinese Foreign Ministry spokesman Geng Shuang said the country has lodged a diplomatic protest to India over the drone violating Chinese sovereignty. The standoff ended after Chinese troops stopped building a key road close to India's Chicken Neck corridor.