The comments by Randall Schriver, who leads Asia policy at the U.S. Defense Department, are likely to increase tension with Beijing, which is sensitive to international criticism and describes the sites as vocational education training centers aimed at stemming the threat of Islamic extremism.
Former detainees have described to Reuters being tortured during interrogation at the camps, living in crowded cells and being subjected to a brutal daily regimen of party indoctrination that drove some people to suicide.
Some of the sprawling facilities are ringed with razor wire and watch towers.
"The (Chinese) Communist Party is using the security forces for mass imprisonment of Chinese Muslims in concentration camps," Schriver told a Pentagon briefing during a broader discussion about China's military, estimating that the number of detained Muslims could be "closer to 3 million citizens."
Schriver, an assistant secretary of defense, defended his use of a term normally associated with Nazi Germany as appropriate, under the circumstances.
When asked by a reporter why he used the term, Schriver said that it was justified "given what we understand to be the magnitude of the detention, at least a million but likely closer to 3 million citizens out of a population of about 10 million."
"So a very significant portion of the population, (given) what's happening there, what the goals are of the Chinese government and their own public comments make that a very, I think, appropriate description," he said.
The Chinese embassy in Washington did not immediately respond to a request for comment.