Australian stocks bucked the trend and climbed 1.2 per cent.
Asian shares on Wednesday struggled at two-year lows after Chinese stocks extended their fall, stoking fears about the stability of China's economy.
The Shanghai Composite Index retreated 3.9 per cent, a day after worries that the central bank could be in no hurry to ease policy further pushed it down 6.1 per cent.
The plunge dented hopes of Chinese share markets stabilising after Beijing effectively pulled out all the stops to stem the rout.
Japan's Nikkei fell 0.5 per cent and South Korea's Kospi lost 1.3 per cent.
"Investors care about these two things -- China's economy and the timing of a US rate hike.
These two concerns dominate their minds now," said Masaru Hamasaki, head of market & investment information department at Amundi Japan.
MSCI's broadest index of Asia-Pacific shares outside Japan slid to a two-year low and was last down 0.1 per cent.
Australian stocks bucked the trend and climbed 1.2 per cent.
Shares of importers and firms with high US dollar-denominated debt have been under pressure following last week's yuan devaluation.
The spectre of a slowdown in China's economic growth and a US interest rate hike hs hit asset markets in emerging economies hardest.
MSCI's emerging market index fell to its lowest level since October 2011.
It has dropped more than 20 per cent from the year's peak it hit in April.
Wall Street shares also retreated overnight, with the S&P 500 sliding 0.26 per cent, pressured by weak earnings from retail giant Wal-Mart.
Concerns about slowing demand from China for commodities also hit copper prices, which slid to a six-year low of $4,983 a tonne, breaking the psychological $5,000 level.
It last stood at $5,025.00 a tonne.
That in turn knocked copper exporters, with the Chilean peso sinking to 12-year lows.
Ripples were also felt in other emerging currencies following China's surprise move to weaken the yuan last week.
Vietnam widened the dollar/dong trading band to 3 per cent from 2 per cent, the second move in a week, in an effort to protect its exports.
A number of emerging market currencies meanwhile are facing capital outflows also as investors shift funds to the dollar, interest rates on which look set to rise.
US housing starts rose to a near eight-year high in July as builders ramped up construction of single-family homes, supporting the case for a rate hike.
Many investors and economists see the Fed as most likely to make its first hike in nearly a decade next month as the labour market continues to improve.
The minutes of the Federal Reserve's July meeting due later on Wednesday will be scrutinised with extra care for any new clues on the Fed's likely timing.
The prospects of higher rates supported the dollar against most other currencies.
The euro traded at $1.1050 , having hit one-week low of $1.10165 on Tuesday.
The British pound also gained, rising to a 7 1/2-year high on a trade-weighted basis as UK inflation data released on Tuesday beat expectations, bolstering bets that the Bank of England will raise interest rates in the coming months.
"On top of the Fed, the Bank of England is likely to raise rates around the same time. Considering the UK is a global money centre, simultaneous tightening could increase anxiety (on risk assets)," said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management.
Oil resumed falling after a brief bounce on Tuesday.
Prospects of demand from the United States weakening during the upcoming autumn and a slowdown in Asia's leading economies have weighed on the commodity.
US crude futures were down 0.2 per cent at $42.52 per barrel, edging back towards a 6-1/2 year low of $41.35 struck on Friday.
Brent crude was down 0.4 per cent at $48.63 a barrel and in reach of 6-1/2 month troughs.
Image: Chinese stock investors react. Photograph: Reuters
Additional reporting by Ayai Tomisawa in Tokyo
