Profit-taking by investors in China sent the Shanghai Composite lower by more than 5% in Tuesday trade.
The benchmark index gave up 163.9 points or 5.4% at the close, to end at 2,856.27 points.
That is the biggest one-day percentage fall since August 2009.
Investors went on a profit-taking spree one day after the benchmark index broke past the 3,000 mark for the first time in more than three years.
Shares of Chinese financial and property firms were caught in the selloff.
The profit-taking filtered into neighbouring Hong Kong, where the benchmark Hang Seng index closed lower by 2.3% to 23,485.83 points.