The Indonesian navy seized the Chinese boat in waters near the Natuna Islands on Friday for allegedly fishing illegally, the military said.
The boat was towed to shore and eight Chinese crew members have been detained.
Jakarta and Beijing have clashed before over the islands on the southwestern fringe of the disputed South China Sea, where China is also at loggerheads with several other countries because of its overlapping claims.
Chinese foreign ministry spokeswoman Hua Chunying insisted the detained vessel had been operating legally.
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"We have made stern representations with Indonesia concerning this matter."
Achmad Taufiqoerrochman, the commander of Indonesia's Western Fleet, said the vessel -- the Gui Bei Yu -- was "strongly suspected" of having carried out illegal fishing because of the catch that was found onboard.
The military said the boat was detained in Indonesia's "exclusive economic zone", waters where a state has sole rights to exploit resources.
The boat's detention shows Indonesia "will enforce the law against boats that commit violations in Indonesia's jurisdiction", it added.
Jakarta responded furiously, lodging a protest and summoning China's top envoy in Indonesia.
Indonesia does not have overlapping territorial claims in the sea with China, unlike other nations, but it objects to Beijing's claims as they overlap with the exclusive economic zone around the Natunas.
An increasing number of foreign trawlers have been detained in Indonesian waters after Jakarta in 2014 launched a tough crackdown on illegal fishing.