The security alert sent to mobile phone users in Taiwan said the Chinese satellite had flown over Taiwan airspace, around the same time Chinese state media confirmed the launch of a science satellite.
The short message from Taiwan's defence ministry was sent after 3 p.m. local time. The "presidential alert" described the projectile as a "satellite" in Chinese, and a "missile" in English.
Taiwan's defence ministry later blamed "negligence" for the mistaken reference to a missile. It also said the rocket had passed at high altitude over Taiwan airspace.
Chinese state news agency Xinhua said China had launched "a new astronomical satellite" called the Einstein Probe from the southwestern province of Sichuan.
China had not previously announced the satellite launch and did not offer any details on its flight plan. China made two satellite launches on consecutive days in early December from a launch site in Inner Mongolia. Neither of those had flown over Taiwan or triggered an alert.
China's state media described the probe as a small satellite dedicated to high-energy astrophysics and astronomy.
Taiwan's Foreign Minister Joseph Wu who was giving a press conference to dozens of foreign reporters at the time of the alert, described the launch as a provocation towards Taiwan, just like the recent cases of Chinese balloons spotted over the island.
"All these kinds of tactics are classified as grey-zone activities, (and) continue to remind the people here in Taiwan that there is a danger of war between Taiwan and China," he told reporters.
"With these kinds of threats against Taiwan I think we should be clear eyed, we should not be provoked."
Taiwan's main opposition Kuomintang Party criticised the alert, saying it had misled the public.
The alert did not impact foreign exchange markets and did not cause fluctuations in the Taiwan dollar, four traders told Reuters.
Taiwan's defence ministry accused China on Saturday of threatening aviation safety and waging psychological warfare on the island's people with the recent spate of balloons.
Taiwan has complained for four years of stepped-up Chinese military action such as fighter jets regularly flying over the strait as part of a "grey zone" strategy attempting to wear down Taiwan with offensive actions that stop short of full-blown conflict.
