The proposed deal includes a radar system to track incoming strikes and anti-ship and anti-air missiles.
It comes after US House of Representatives Speaker Nancy Pelosi last month became the most senior US official in 25 years to visit Taipei.
The Chinese embassy in Washington called on the US to revoke the deal or face "counter-measures".
Spokesman Liu Pengyu said the deal "severely jeopardises" relations between Washington and Beijing.
"China will resolutely take legitimate and necessary counter-measures in light of the development of the situation," he added.
Beijing sees the self-ruled island as a part of its territory and insists it should be unified with the mainland, by force if necessary.
It launched large-scale military drills around Taiwan last month, following the American delegation's visit.
The US arms sale agreed on Friday still needs to be voted on by the strongly pro-Taiwan US Congress.
The package includes a $655m radar warning system and $355m for 60 Harpoon missiles, which are capable of sinking ships.
It includes $85.6m for Sidewinder surface-to-air and air-to-air missiles, according to the Pentagon's Defense Security Cooperation Agency.
A spokesperson for the Department of State said the deal was "essential for Taiwan's security", and called on Beijing "to cease its military, diplomatic and economic pressure against Taiwan and instead engage in meaningful dialogue".
"These proposed sales are routine cases to support Taiwan's continuing efforts to modernise its armed forces and to maintain a credible defensive capability," the spokesperson said.
The Pentagon last month created a task force to help streamline the sale of American weaponry to foreign allies, the Wall Street Journal reported on Friday.
US lawmakers say that orders placed by Taiwan years ago have gone unfulfilled. Among the backlog are Harpoon and Stinger missiles, which have been sent to Ukraine instead, according to Defense News.
In another move likely to irk Beijing, the Biden administration said it would keep in place for now billions of dollars in tariffs on Chinese imports that were enacted during the Trump administration.
The US Trade Representative's office said it had received requests to maintain the 2018-19 duties from businesses and other interested parties.
US officials had been considering revoking the tariffs, citing the need to ease inflation.
On Friday, meanwhile, President Joe Biden asked Congress to approve $13.7bn in emergency funding for Ukraine, amid the ongoing war with Russia.
The Pentagon said last week that total US military aid to Ukraine had already topped $13bn.
-- Courtesy of BBC News