"We are very concerned about a prospective deal between Turkey and Chinese firm that is sanctioned (by the United States)," ambassador Francis Ricciardone told reporters.
"Yes, this is a commercial decision... It's Turkey's sovereign right to make its own decisions about defence acquisitions or anything else," he said.
"There is no challenge, there's no disagreement between us but we are seriously concerned about what this means for allied missile air defence."
Ricciardone said Washington began expert-level discussions with Turkey in order to make sure the full facts about the Chinese company are taken into consideration.
"We are concerned but Turkey will make its own decision in line with the ... Examination of the facts," Ricciardone said
"We are now dealing with a strategic mutual defence question," rather than a merely commercial question.
"For the moment, China is offering the best conditions" including meeting Ankara's demand to co-produce the missiles, he said, but gave no date for a decision.
CPMIEC, which makes the HQ-9 missile system, beat out competition from a US partnership of Raytheon and Lockheed Martin, Russia's Rosoboronexport, and Italian-French consortium Eurosam.
The Chinese company has been hit by a series of US sanctions over the past decade, accused of selling arms and missile technology to Iran and Pakistan.
"I feel confident Turkey is aware of this NATO position and... Will take that into account before taking the final decision," NATO's chief Anders Fogh Rasmussen said Tuesday.
Ankara however brushed off NATO's concerns, with Erdogan saying that "member countries routinely have Russian arms and equipment in their inventories".
"No one has the right to intervene in (Turkey's) independent decisions," he said.