Taiwan's defence minister Yen Teh-fa said on Wednesday the Soviet-built aircraft carrier entered the Taiwan Strait on Tuesday.
In an address to China's nearly 3,000-member national parliament, Xi said China had the capabilities to stop any attempt to formalize the democratically ruled island's independence.
He said his ministry is keeping a close watch on China's drills in the area, but refused to disclose further details.
China still sees Taiwan as its territory awaiting reunification, by force if necessary, even though the two sides split in 1949 after a civil war and have been ruled separately ever since.
China's first aircraft carrier, the Liaoning, is seen anchored in the northern port in Qingdao, east China's Shandong Province.
China's hostility towards Taiwan has risen since the 2016 election of President Tsai Ing-wen, a member of the island's pro-independence Democratic Progressive Party. Her government refuses to acknowledge that the island is part of "one China".
The Taiwan Travel Act encourages USA government officials to travel to Taiwan for meetings, which is in direct contrast of China's "One-China" policy.
A blistering nationalist speech by Xi on Tuesday - in which he issued some of his strongest words yet toward Taiwan - came on the heels of new U.S. rules, backed by U.S. President Donald Trump, that allow top-level American officials to travel to the self-ruled island.
"It is a shared aspiration of all Chinese people and in their basic interests to safeguard China's sovereignty and territorial integrity and realize China's complete reunification", he said.
"All acts and tricks to separate the country are doomed to fail and will be condemned by the people and punished by history", Xi said in an address ending the annual session of the National People's Congress. He is due to speak at a business event in Taipei later on Wednesday with Tsai.