The Shanghai Composite index plunged 5.2 percent to its lowest level since November 2014, and Japan's Nikkei 225 fell by an unusually wide margin of nearly 4 percent.
Markets in Hong Kong, South Korea, Australia and Southeast Asia recorded similar declines.
Gold rose as sliding global stock markets prompted risk-wary investors to seek the metal, and a drop in U.S. Treasury bond yields helped push the dollar lower. That will raise the cost of corporate borrowing and could drag on economic growth.
The Federal Reserve has raised rates three times this year to keep inflation in check.
The blood letting was bad enough to attract the attention of US President Donald Trump, who pointed an accusing finger at the Fed for raising interest rates.
"I think the Fed has gone insane", he charged.
Stephen Innes of OANDA said that Trump's comments have put pressure on the dollar but "the severity of this equity rout could bring the hawkish Fed narrative into question". The "latest sneeze" from Wall Street "could morph into a global markets pandemic", he added.
Oil prices slumped to two-week lows as global stock markets fell, with investor sentiment made more bearish by an industry report showing US crude inventories rising more than expected.
Shares in Chinese smartphone maker Xiaomi dropped 8.9pc and fellow Chinese technology business Tencent saw a drop of 7.4pc.
European stocks have been penalized by political turmoil and the region's vulnerability to trade risks, while tax cuts, share buybacks and a booming economy have boosted US stocks. The Kospi in South Korea fell 4 percent to 2,139.51. Australia's S&P/ASX 200 slipped 2.4 per cent to 5,906.00.
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Tech stocks, hit hard Wednesday, fell slightly in early trading. "Equity markets are locked in a sharp sell-off, with concern around how far yields will rise, warnings from the International Monetary Fund about financial stability risks and continued trade tension all driving uncertainty", summed up analysts at ANZ.
The Dow Jones Industrial Average lost 101 points, or 0.4 percent, to 25,497. The Nasdaq composite, which has a large contingent of technology stocks, was 4.1% lower at 7,422.05.
On Wall Street, the S&P 500 index suffered its biggest one-day fall since February as technology shares tumbled on fears of slowing demand. The Russell 2000 index of smaller-company stocks shed 2.9 percent, to 1,575.41.
Apple and Amazon, the two most valuable companies in the S&P 500, each had their worst day in two-and-a-half years.
France's CAC 40 dropped 1.8 percent to 5,111 and the DAX in Germany lost 1.6 percent to 11,526. Amazon has soared 50 percent this year, but its stock has fallen 14 percent from its all-time high in early September.
"The gap between the performance of US and Eurozone equities is no coincidence", said Patrick Moonen, multi-asset strategist at Dutch asset manager NN Investment Partners.
"The valuation of United States stocks, especially tech stocks, is still pretty high and there could be some profit taking actions now", Mr Tan explained.
The dollar eased to 112.24 yen from 112.27 yen late Wednesday. The euro rose to 1.1566 U.S. dollars from 1.1523 dollars.
Oil futures fell. USA crude gave up $1.39 to $71.78 a barrel.
It will take more than a daily stock market correction to stop the Fed from hiking, said George Goncalves, managing director and head of fixed income strategy at Nomura in NY. Brent crude, the global standard, dropped 76 cents to $82.33 a barrel.