The Obama administration has warned China over its use of agents on US soil to put pressure on Chinese expatriates, according to a New York Times report.
Beijing is running a global campaign to repatriate Chinese fugitives and recover illicit funds, the newspaper said citing unnamed US officials.
The US state department has now resorted to warning Chinese officials about the activities, the report says.
Chinese President Xi Jinping will make a state visit to the US next month.
The alleged programme - reportedly codenamed Operation Fox Hunt by Beijing - is separate from China's routine spying activities against the US.
The New York Times said the undercover agents were working under the direction of China's Ministry of Public Security and probably entering the country on tourism or trade visas.
Their tactics reportedly include threats to family members who remain in China.