Beijing announced the formation of the new city Sansha and elected Xiao Jie (51) as its first mayor on the island.
China's Central Television aired the ceremony of formal takeover by the new mayor live.
The step comes close on the heels of the country's powerful Central Military Authority approving the deployment of the military garrison in the new town, which is 13 hours by boat from the mainland.
China has also docked four surveillance naval ships off the Sansha's coast to patrol the South China Sea.
In speeches, the new mayor and other top party officials trumpeted Sansha's important role in protecting China's sovereignty.
Forty-five deputies to the municipal people's congress attended the first session of the first Sansha Municipal People's Congress and cast their votes.
The deputies, divided into groups from the Xisha, Nansha and Zhongsha islands, were elected Saturday by 1,100 residents from the islands.
The State Council, or China's cabinet, in June approved the establishment of Sansha, a prefectural-level city in South China's Hainan province to administer the Xisha, Zhongsha and Nansha islands and the surrounding waters in the South China Sea.
Sources with the People's Liberation Army Guangzhou Military Command said Friday that the Central Military Commission had authorised it to form a garrison command in the city.
