The flag on a car carrying the Japanese ambassador was ripped off by an unidentified man in Beijing on Monday, the Japanese embassy told the Global Times on Monday.
The ambassador, Uichiro Niwa, was not hurt and has so far made no comment on the incident, which occurred at around 4 pm along the capital's East 4th Ring Road.
Niwa's car was forced to stop by two vehicles, and a man stepped out of one and ripped off the flag, the embassy said.
The Japanese embassy has lodged a protest to the Chinese foreign ministry and demanded such an incident is never repeated, it said.
But Japan's foreign ministry later said the flag had been snatched after the ambassador's car had become stuck in a traffic jam. A ministry spokesman said it would be too strong to describe the incident as an attack, Reuters reported.
The embassy said that a Chinese foreign ministry official called the incident "extremely regrettable" and pledged efforts to ensure the safety of Japanese citizens and businesses in China.
The foreign ministry told Xinhua Monday that authorities have been investigating this matter, and the Chinese government will follow the Vienna Convention on Diplomatic Relations and protect the safety of foreign diplomats.
The incident also drew great attention in microblogs, with most criticizing the incident, though many retain their resentment toward right-wing Japanese politicians' recent moves over the Diaoyu Islands.
The incident occurred amid tensions between China and Japan over the islands which escalated in mid-August, when the Japanese Coast Guard detained and deported Chinese activists who landed on the islands.
Anti-Japanese demonstrations have taken place in Chinese cities over the past two weekends.
However, Niwa, a business executive-turned-diplomat, appeared to oppose a string of moves by the Japanese government concerning the Diaoyu Islands, prompted by the right-wing Tokyo governor Shintaro Ishihara.
Niwa has said Ishihara's proposal to purchase the Diaoyu Islands would "result in an extremely grave crisis" between the two East Asian neighbors.
The Japanese foreign ministry was reported to be replacing Niwa with deputy foreign minister Shinichi Nishimiya in October.
In an effort to calm down current tensions, the Japanese government on Monday rejected the Tokyo metropolitan government's application to land on the Diaoyu Islands. Chief Cabinet Secretary Osamu Fujimura said the move is designed to maintain the stability of this area, according to Xinhua.
Agencies contributed to this story