WASHINGTON (AFP) - US Defence Secretary Leon Panetta on Wednesday urged China to avoid confrontation and seek out a peaceful dialogue with Japan and other countries over territorial disputes.

The Pentagon chief said he has appealed to his counterparts in Beijing to negotiate regional agreements to defuse an array of disagreements over maritime territory.

Asked about tensions between China and Japan over the Senkaku Islands after giving a speech at Georgetown University, Mr Panetta voiced concern that "it's the kind of situation where there are territorial claims that could ultimately get out of hand."

He added: "One country or the other could react in a way that could create an even greater crisis."

Tensions rose over the island dispute as Japan said a Chinese frigate had locked its weapon-targeting radar on a Japanese warship in the East China Sea last week. Japan's Prime Minister Shinzo Abe called the move "dangerous" and "provocative."

Mr Panetta said China, the United States and other countries should work together to address "common challenges," including piracy, natural disasters and territorial disputes.

"But to the Chinese, I basically said, 'It is in your interest - it is in your interest to work with other countries to resolve these issues. Because if your interest is in a Pacific region that can be peaceful and that can prosper in the future, you have to be part of that," Mr Panetta said.

"It cannot be a China that threatens other countries. It cannot be a China that threatens, you know, to go after their territories and create territorial disputes."

Asia's two largest economies are at odds over the sovereignty of an uninhabited island chain in the East China Sea, which Beijing claims as the Diaoyus.