National Security Adviser Eduardo Ano made the announcement during a visit to the Philippine-held Thitu Island, which is part of the hotly contested Spratly Islands.
The coast guard station would be equipped with "advanced systems", including radar, satellite communication, coastal cameras and vessel traffic management, Ano said.
The station has been built and is expected to be operational early next year.
"These systems will greatly enhance the PCG's ability to monitor the movements of the Chinese maritime forces, other countries that might be coming here, and also as well as our own public vessels and aircraft," Ano said, referring to the Philippine Coast Guard.
The collection of real-time data would have "an impact on the behaviour" of rival claimants, especially the Chinese, Ano said, hailing it as a "game changer".
Thitu is about 430 kilometres (267 miles) from the major Philippine island of Palawan and more than 900 kilometres from China's nearest major landmass of Hainan island.
Beijing claims most of the South China Sea, including waters and islands close to the shores of its neighbours, and has ignored an international tribunal decision that its assertion has no legal basis.
It deploys vessels to patrol the waters, and has built artificial islands and military installations to reinforce its stance.
The Philippines, Brunei, Malaysia, Taiwan and Vietnam have also staked claims to various islands and reefs in the sea that is believed to have rich petroleum reserves deep beneath its waters.
Relations between Manila and Beijing have frayed in recent months over a series of incidents in the waters, including two collisions between Philippine and Chinese boats, with the countries trading blame.
On Friday, Ano accused Chinese coast guard and other vessels of engaging in "illegal" and "aggressive" behaviour towards Filipino fishermen and patrol boats.
"It's pure bullying," Ano said.
"We shall not waver, we will stand our ground. We will not be deterred by any power that tries to oppress and outmuscle us."
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