Three fishermen found the drone on Monday around nine kilometres (six miles) off the coast of San Pascual in Masbate province, a police report said.
The Philippines and China have for years clashed over maritime rights in the South China Sea as well as possession of reefs and islets.
China claims almost the entire sea, brushing off rival claims from other countries and an international ruling that its assertion has no legal basis.
The yellow drone marked "HY-119" was found floating at sea before being turned over to authorities, regional police director Andre Dizon told AFP.
It was about two metres (six feet) long, and torpedo-shaped with fins.
"Based on our open-source research in the internet... HY-119 refers to a Chinese underwater navigation and communication system," Dizon said.
"It has an antenna and an eye that can be used for viewing. Based on our research, this can be used for monitoring and reconnaissance."
Dizon said the drone was not armed, but the police report listed "potential national security implications" as one significance of its recovery.
It was turned over by police to the Philippine Navy on Tuesday, Dizon added.
The Philippine Navy and the Chinese embassy in Manila have yet to respond to AFP's request for comment.
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