Indonesia has condemned Australian naval incursions into its waters as a "violation of its sovereignty".
Australia has apologised to Indonesia, saying its navy vessels "inadvertently" made the incursions during operations to stop asylum seekers.
Indonesia has asked Australia to suspend these operations until the incidents have been clarified.
The row comes amid reports Australia's navy have been pushing boats carrying asylum-seekers back to Indonesia.
At a press conference, Australian Immigration Minister Scott Morrison said the violations, which had occurred several times, had not been sanctioned by the government.
Australia took its "shared commitment with Indonesia to mutually respect the sovereignty of each nation very, very seriously", he said, adding that the foreign minister would offer an "unqualified apology".
Lieutenant General Angus Campbell, who leads operations to prevent boats carrying asylum seekers arriving in Australia, blamed the violations on "positional errors".
"We have never intended for our assets to operate or to enter the sovereign territory of another nation," he said.
Indonesia said in a statement on Friday that it "deplores and rejects the violation of its sovereignty and territorial integrity by Australian vessels".
It would "intensify its maritime patrols in areas where violations of its sovereignty and territorial integrity are at risk", it added.
"Indonesia demands that such [asylum] operations conducted by the Australian government that led to this incident be suspended until further clarification is received."
Tow-backsThe Australian government has been under scrutiny over asylum policy in recent days amid reports of boats being turned back to Indonesia.
Indonesia serves as a transit point for people-smugglers, who ferry people to Christmas Island, the closest part of Australian territory, on rickety boats. The number of boats rose sharply in 2012 and the beginning of 2013, and dozens of people have died making the journey.
When Prime Minister Tony Abbott's Liberal-National Coalition ousted Labor last year, it initiated Operation Sovereign Borders, giving the military control over the response to people-smugglers, and vowed to stop the boats.
In recent days multiple reports have emerged in Australian and Indonesian media of boats carrying asylum seekers being towed back to Indonesian waters by Australian navy vessels.
It has also been reported that Australia has bought lifeboats for the purpose of transporting asylum seekers back to Indonesia.
The government has refused to comment on these reports, citing operational sensitivities. But it did deny a report that an Australian navy vessel had fired shots into the air as it intercepted an asylum boat.
'No solution'Earlier this month the Indonesian foreign minister spoke out on the alleged push-back policy.
"Let me once again put on record that Indonesia rejects Australia's policy to turn back the boats because such a policy is not actually conducive to a comprehensive solution," Marty Natalegawa said.
Ties between Australia and Indonesia remain strained in the wake of spying revelations in documents leaked by fugitive US intelligence contractor Edward Snowden.
Last week, the UN refugee agency (UNHCR) said it was seeking details from Canberra on the recent reports of push-backs.
"Any such approach would raise significant issues and potentially place Australia in breach of its obligations under the [1951] Refugee Convention and other international law obligations," UNHCR spokesperson Adrian Edwards said.
The UN and rights groups have also strongly criticised conditions at Australia's offshore asylum processing camps, on the Pacific island of Nauru and on Papua New Guinea's Manus Island.
Earlier this week the Australian government said its asylum policies were working, with no new boat arrivals for over three weeks.
Asylum is a sensitive issue in Australia, despite the relatively small numbers involved. UNHCR's Asylum Trends 2012 report said Australia received only 3% of global asylum applications in 2012.
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