Quoting unnamed US and allied officials, The Wall Street Journal (WSJ) reported that Phnom Penh and Beijing signed an agreement this spring that would guarantee China exclusive access to part of the Cambodian Navy's Ream base in Sihanoukville province.
This would mark China's first naval outpost in Southeast Asia and comes amid tensions between the Asian giant and several countries over the militarization of and sovereignty disputes in the South China Sea.
Cambodia's leader, however, refuted the report, Efe news reported.
"It was the worst distorted news against us. No such thing happens. Foreign military base is against Cambodia's Constitution," Prime Minister Hun Sen told the government-aligned Fresh News.
"We have never discussed such matter with Beijing, so it is needless to say an agreement (was) reached," he added.
While the WSJ said some details of the final agreement were unclear, a draft said China could use the facilities for a period of 30 years and it would be automatically renewed every 10 years.
It would allow China to post military personnel at the base, as well as store weapons and berth warships, it added.
The draft agreement provides for Beijing to build two piers one for its use and the other for Cambodian use, and allows Chinese personnel to carry weapons and Cambodian passports. It requires Cambod to get permission to enter the area, the WSJ said citing US officials.
Further west along the coast, a private Chinese company with a 99-year lease is building a vast complex with an airport that has a 3.2 kilometre (2 miles) long runway, reportedly of military capacity.
The WSJ said the US and allied counterparts are lobbying Phnom Penh against allowing Beijing to use the airport for its military.
The bases could allow China to expand its interests and exert itself in the region. It already has several military installations built on islands in the South China Sea, an area that it claims in its entirety and disputed by Taiwan, Vietnam, the Philippines, Brunei and Malaysia.
The US has repeatedly condemned Beijing's stance over the region, a key strategic zone for trade routes that is rich in natural resources, including fish, gas and oil.
Tensions in the area have increased in recent years through altercations and accusations between states in the region and its militarization by China.
( With inputs from IANS )