Australia's ambassador met Indonesian government officials who summoned him following reports the Australian Embassy in Jakarta is a hub for Washington's secret electronic data collection programme.
A document from National Security Agency leaker Edward Snowden, published by German magazine Der Spiegel, describes a signals intelligence programme called "Stateroom" in which US, British, Australian and Canadian embassies house surveillance equipment to collect electronic communications.
Those countries, along with New Zealand, have an intelligence-sharing agreement known as "Five Eyes".
The Australian embassy in Jakarta was listed as one of the embassies involved in a report from Australia's Fairfax media, along with Australian embassies in Bangkok, Hanoi, Beijing and Dili in East Timor; and High Commissions in Kuala Lumpur and Port Moresby, Papua New Guinea.
Des Ball, a senior Australian intelligence expert, told The Associated Press he had personally seen covert antennas in five of the embassies named in the report.
Indonesia's government dubbed such actions "a serious breach of diplomatic norms and ethics" and summoned Australian Ambassador Greg Moriarty to a meeting with the Foreign Ministry's Secretary General Budi Bowoleksono today.
"From my perspective it was a good meeting and now I have to go and report directly to my government," Mr Moriarty said afterward.
The reports sparked an outcry from governments across Asia, with officials calling on the US and its allies to explain themselves.
The embassy spying allegations follow other reports that the US has spied on the telephone communications of as many as 35 foreign leaders.
"China is severely concerned about the reports, and demands a clarification and explanation," Chinese Foreign Ministry spokeswoman Hua Chunying said yesterday.
Indonesian Foreign Minister Marty Natalegawa said today the allegations were deeply concerning and unacceptable.
"Countries may have capacities, technical capacities, to intercept and to carry out the activity that's been reported, and information may have been gathered," he told reporters in Perth, Australia, where he is attending a conference.
"But the cost - in terms of trust, in terms of the damage - that may be resulting, is something that we must all reflect on."
According to the Snowden document, the spying sites are small in size and staff. "They are covert, and their true mission is not known by the majority of the diplomatic staff at the facility where they are assigned," it said.
The surveillance equipment is concealed, including antennas that are "sometimes hidden in false architectural features or roof maintenance sheds," the document said.
Australian Prime Minister Tony Abbott said only that the government had not broken any laws.
Still, there was predictable outrage in the countries named in the document.
Malaysian home minister Ahmad Zahid Hamidi said his government viewed the allegations as a serious matter and would investigate whether the US Embassy in Kuala Lumpur was being used for spying.
The country's opposition party issued a statement yesterday urging the Malaysian government to lodge a protest with both the US and Australian embassies.
Thailand's National Security Council Secretary-General, Lt. Gen Paradorn Pattanathabutr, said the government told the US that spying was a crime under Thai laws, and that Thailand would not co-operate if asked to help eavesdrop.
Asked about the Australian embassy allegations, he said Australians are not capable of doing such sophisticated surveillance work.
"When it comes to technology and mechanics, the US is more resourceful and more advanced than Australia," he said.
"So I can say that it is not true that the Australian embassy will be used as a communications hub for spying."