The warning comes days after China stepped up its military activities and flew warplanes near the island.
It also comes after new US President Joe Biden reaffirmed his commitment to Taiwan, and set out his stance in Asia.
The US has called China's latest warning "unfortunate", adding that tensions did not need to lead to "anything like confrontation".
China sees democratic Taiwan as a breakaway province, but Taiwan sees itself as a sovereign state.
"We are seriously telling those Taiwan independence forces: those who play with fire will burn themselves, and Taiwan independence means war," Chinese defence ministry spokesman Wu Qian said at a press conference on Thursday.
He also defended China's recent military activities, saying they were "necessary actions to address the current security situation in the Taiwan Strait and to safeguard national sovereignty and security".
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