The surprisingly strong and sweeping ruling by the UN-backed body in The Hague provided powerful diplomatic ammunition to the Philippines, which filed the challenge, and other claimants in their decades-long disputes with China over the resource-rich waters.
China reacted furiously to Tuesday's decision, with its foreign ministry quickly declaring it "null and void" and the government releasing a white paper on Wednesday insisting on the validity of the historical rights for claiming sovereignty that the tribunal rejected.
In Washington, the Chinese ambassador to the United States gave a blunt assessment of what the ruling could mean for a body of water that has long been regarded as a potential military flashpoint, and the site of deadly clashes between Vietnam and China.
"It will certainly undermine or weaken the motivation of states to engage in negotiations and consultations for solving their dispute. It will certainly intensify conflicts and even confrontation," ambassador Cui Tiankai said.
China justifies its position by saying it was the first to have discovered, named and exploited the sea, and outlines its claims for most of the waterway using a vague map made up of nine dashes that emerged in the 1940s.
Those claims overlap with those of the Philippines, Vietnam, Malaysia, Brunei and Taiwan.
Manila, under previous president Benigno Aquino, launched the legal case in 2013 after China took control of Scarborough Shoal, a rich fishing ground within the Philippines' exclusive economic zone and far away from the nearest major Chinese landmass.
China has also in recent years built giant artificial islands capable of hosting military installations and airstrips in the Spratlys archipelago, one of the biggest groups of islands in the sea.
- 'No legal basis, unlawful' -
Aside from stating that China's historical rights were without "legal basis", the tribunal ruled that its artificial island building and the blocking of Filipino fishermen at Scarborough Shoal were unlawful.
However the Philippines, under new President Rodrigo Duterte, declined to celebrate the verdict, saying on Tuesday only that it welcomed the ruling while calling for sobriety and restraint.
Duterte has repeatedly said he wants to improve relations with China, which plummeted under Aquino because of the dispute, and that he would seek Chinese investment for major infrastructure projects such as a railway for the impoverished southern Philippines.
His Foreign Minister, Perfecto Yasay, told AFP in an interview last week that the Philippines would seek to use the verdict as the basis for direct talks with China aimed at achieving a long-awaited code of conduct among rival claimants for the sea.
However China faced immediate pressure from Western powers, which insist they have legitimate interests in the dispute because of the need to maintain "freedom of navigation" in waters that hosts more than $5 trillion in shipping trade annually.
The United States emphasised on Tuesday that China, as a signatory to the United Nations Convention on the Law of the Sea, should accept the verdict.
"As provided in the convention, the tribunal's decision is final and legally binding on both China and the Philippines," State Department spokesman John Kirby told reporters in Washington.
Kirby called on all sides "to avoid provocative statements or actions".
Australian Foreign Minister Julie Bishop warned China on Wednesday there would be "strong reputational costs" for ignoring the ruling, as she called for an end to Chinese island building.
"China seeks to be a regional and global leader and requires friendly relations with its neighbours. That's crucial to its rise," Bishop told national broadcaster ABC.
Military tensions in the sea had already spiked in the lead-up to the verdict.
China launched naval drills in the northern areas, while the US Pacific Command said it had deployed an aircraft carrier for flights to support "security" in the sea.
Taiwan, which was another loser in the verdict as its claims are very similar to those of China, announced it would send a warship to the sea on Wednesday to protect its rights.
China used deadly force to seize control of the Paracel Islands from South Vietnam in 1974, and Johnson Reef from a united Vietnam in 1988.
Singapore-based regional security expert Ian Storey said China may increase its military presence in the sea in response to the verdict, which would guarantee extra friction with the United States and some Southeast Asian nations.
"The waters of the South China Sea are about to get a whole lot more turbulent over the next few months," Storey told AFP.//AFP