El Salvador is the third Latin American nation that has decided to break ties with Taiwan in just over a year.
China claims Taiwan as its own territory and is ramping up a campaign to diplomatically isolate the self-governing island rival.
Even though the US formally recognises only China, it maintains a de facto embassy known as the American Institute in Taiwan.
Taipei has a similar quasi-diplomatic outpost in Washington.
The spokesman for the US State Department said: “Although we recognise the sovereign right of every country to determine its diplomatic relations, we are deeply disappointed by this decision.
«We are reviewing our relationship with El Salvador following this decision.»
Tensions between the US and El Salvador have been heating up since President Donald Trump threatened to cut aid from countries that «do nothing» to stop MS-13 gang members from entering the US illegally.
Jean Manes, the US Ambassador in El Salvador, said on Tuesday that Salvadorans need to demand transparency about how their government decided to switch diplomatic partners.
Ms Manes said: «I think you should know, exactly, all the details of the negotiation.»
She also wrote on Twitter that the US was analysing El Salvador’s «worrisome» decision.
Florida Senator Marco Rubio also criticised the country’s «switch» and threatened to block funding for El Salvador, accusing it of being “against the US on everything».
He tweeted: “Why should we keep sending them so much foreign aid?
«Today I will begin work to end that.»
Taiwan’s Foreign Minister Joseph Wu condemned what he called China’s campaign of luring away Taiwan’s allies with promises of vast financial aid and investment.
He said: “It is irresponsible to engage in financial aid diplomacy or compete with China in cash, or even in providing illegal political money.
“My government is unwilling to and cannot do so.”