Chinese President Hu Jintao has urged Japan to "seriously reflect" on its wartime history and back up government apologies with action.
It was the first meeting between the leaders since the row began
Mr Hu made the comments after meeting with Japanese Prime Minister Junichiro Koizumi, after weeks of tension between the two countries.
He also said the dispute should be resolved through dialogue.
Mr Koizumi told a press conference that the two leaders had had a "frank and meaningful" exchange.
The leaders met in private on the sidelines of an Asia-Africa summit, following three weeks of anti-Japanese protests in China triggered by:
- Tokyo's approval of new school textbooks that China says gloss over Japan's behaviour before and during World War II
- Japan's quest to gain a permanent seat at the UN Security Council
Tensions were raised again on Friday when Japanese lawmakers visited the Yasukuni shrine in Tokyo, honouring the Japanese who died during World War II, including a number of war criminals.
Addressing delegates on Friday, Mr Koizumi reiterated his country's "deep remorse" over its wartime actions.
Speaking on Saturday, Mr Hu said that showing remorse was not enough.
Japan's recent behaviour had been offensive and the country needed to take concrete steps to face up to its wartime past, he said.
"[Japan] should never do anything again that would hurt the feelings of the Chinese people or the people of other Asian countries," he added.
Japan also needed to meet its commitments not to support the independence of Taiwan, which China regards as a renegade province, Mr Hu said.
"We hope both sides will make efforts so that Sino-Japanese relations can be on a healthy and stable development track," he said.
Despite those comments, the two sides, now major trading partners, do seem keen to patch things up, says the BBC's Andrew Harding in Jakarta.
The Chinese leader said both sides would lose if there was confrontation. In that spirit, the Chinese authorities have recently clamped down on street protests triggered by the row.
When the summit in Jakarta started on Friday, Mr Koizumi said: "In the past Japan through its colonial rule and aggression caused tremendous damage and suffering for the people of many countries, particularly those of Asian nations.
"Japan squarely faces these facts of history in a spirit of humility."
The wording repeats previous Japanese apologies, but analysts say the international setting gave the statement added weight.