U.S. Secretary of State Hillary Clinton urged China and Japan on Thursday, Sept 27, to let "cool heads" prevail in a festering dispute over a cluster of East China Sea islands, but hours later Chinese and Japanese diplomats traded barbs at the United Nations, Reuters reported.

Clinton met Chinese Foreign Minister Yang Jiechi on the sidelines of this week's UN General Assembly meeting in New York and said it was important to ratchet down the quarrel over the islands that has soured ties between Asia's two largest economies, a senior State Department official said.

The uninhabited islets, whose nearby waters are thought to hold potentially rich natural gas reserves, are known as the Diaoyu islands in China and the Senkaku islands in Japan. They have been under Japan's control since 1895.

"The secretary ... again urged that cooler heads prevail, that Japan and China engage in dialogue to calm the waters," the official told reporters.

"We believe that Japan and China have the resources, have the restraint, have the ability to work on this directly and take tensions down, and that is our message to both sides," the official said.