This was the first-high level meeting between the two countries after US sent its naval war ship in South China Sea within the 12 miles of the disputed island chain claimed by China.
"During the discussion, the (Defense) Secretary identified two security issues still affecting US-China relations: tensions in the South China Sea and disagreements in cyberspace," the Pentagon Press Secretary Peter Cook said after the 40-minute meeting between the two leaders on the sidelines of the Association of Southeast Asian Nations Defense Ministers' Meeting-Plus (ADMM-Plus) in Kuala Lumpur.
Carter also said that the US takes no position on maritime disputes in the South China Sea, which he said should be resolved peacefully.
"He called on all parties to permanently halt reclamation and militarisation activities," Cook said.
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During the meeting Carter noted Chinese President Xi Jinping's statement that China is "committed to respecting and upholding the freedom of navigation and overflight that countries enjoy according to international law," and that "China does not intend to pursue militarisation".
Carter also accepted a previous invitation from President Xi to visit China.
The two sides agreed to work out the details for a visit next spring, he said.