Comprising of hundreds of small islands, reefs and shoals, the South China Sea is an important shipping route and believed to be rich in natural resources, such as oil and gas.
China claims the entirety of the sea, but Vietnam, Taiwan, the Philippines, Brunei and Malaysia all have competing territorial claims.
At a recent press conference in Jakarta, Deputy Minister for Marine Sovereignty Arif Havas Oegroseno unveiled a new map with the renamed territory.
"We need to continue updating the naming of the sea and report to the United Nations about the borders. This (system) would allow the international community to know whose territory they pass through," Oegroseno told Indonesia's state-run news agency Antara.
Part of the renamed area falls in China's "nine-dash line".
Reacting on the development, Chinese Foreign Ministry spokesman Geng Shuang said he wasn't aware of the details of Indonesia's decision, but reiterated his country's territorial claims to the South China Sea.
"The so-called change of name makes no sense at all and is not conducive to the effort of the international standardization of the name of places," Shuang said at a daily press briefing.
"We hope relevant country can work with China for the shared goal and jointly uphold the current hard-won sound situation in the South China Sea," he said.
Indonesia is not the first country to rename part of the South China Sea.
In 2011, the Philippines renamed the waters as the "West Philippine Sea".
In recent years, China has invested heavily in building and militarising artificial islands in the South China Sea.
Other nations have also deployed military assets to assert their territorial claims. (ANI)