"We tried to be friends with everybody but we have to maintain our jurisdiction now, at least the areas under our control. And I have ordered the armed forces to occupy all these," he said during a visit to a military camp on the Philippines island of Palawan.
Duterte said he may raise the Philippines flag on Pagasa Island, also known as Thitu Island, on the country's independence day on June 12.
Thitu is in the Spratly island chain, parts of which are claimed by the Philippines, China, Taiwan, Malaysia, Brunei and Vietnam.
The Philippines has traditionally been a forceful claimant in the territorial disputes in the South China Sea.
Following his visit, Beijing agreed to allow Philippines fishing ships access to China-controlled territory.
Duterte's latest comments seem to mark a departure from his previous policy, and suggests a desire to pursue the type of militarization Beijing has been accused of bringing to the region.
"Even those, those vacant (islands) that are considered ours, let's live there," Duterte said.
"It's like we're all competing to take these islands. And what's ours now at least, let's take it and make a strong point there that this is ours."
He said the Philippines should "fortify" its territory: "(We) must build bunkers or houses there and make provisions for habitation."
High stakes
US Secretary of State Rex Tillerson has taken a firm line on Beijing's expansionism, saying in his confirmation that the Trump administration would "send China a clear signal."
"Building islands and then putting military assets on those islands is akin to Russia's taking of Crimea. Its taking of territory that others lay claim to," Tillerson said.
CNN's Janie Octia contributed reporting.