However, markets in mainland China edged up a day after posting big gains on hopes that Chinese authorities were preparing sizeable steps to help reverse the decline in growth in the world's second-largest economy.
"Investors expect that probably the central government will announce stimulus measures very soon, so I think that supports the China market," said Lee Kok Joo, head of research at Phillip Securities in Singapore.
The Shanghai Composite Index rose 0.1 percent to 2,117.65 while the smaller Shenzhen Composite Index added 0.7 percent to 878.10.
Elsewhere, Japan's Nikkei 225 index tumbled 1.7 percent to 8,617.51, after hitting a two-month intraday low of 8,596.02.
Hong Kong's Hang Seng fell 0.2 percent to 20,905.76. South Korea's Kospi dropped 1.4 percent at 1,955.84. Australia's S&P/ASX 200 shed 0.3 percent to 4,493.20.
The International Monetary Fund said Tuesday that Spain's economy—already in double-dip recession—will contract by 1.3 percent next year, more than double its previous prediction.
Spain, with near 25 percent unemployment, has introduced a series of austerity and labor measures in a desperate bid to bring down its deficit and convince investors it can manage its finances without outside help.
Madrid is now pushing for the European Central Bank to buy Spanish government bonds and bring down its borrowing costs, but the ECB insists the country must formally apply for aid first.
"Spain remains the major focal point and in this regard there is no progress in the country moving forward with a bailout request," analysts at Credit Agricole CIB in Hong Kong said in a market commentary.
The IMF also cut its estimates for global economic growth, warning that mature economies are at risk of recession.
Among individual stocks, Toyoto Motor Corp. fell 1.7 percent, a day after announcing that sales of new vehicles in China had dropped nearly 49 percent in September. Sales of Japanese vehicles nosedived in China last month as anti-Japanese sentiment flared over a territorial dispute.
Investors expecting Chinese authorities to introduce infrastructure project or loosen restrictions in the property market helped Hong Kong-listed property and construction shares. Henderson Land Development Co. rose 1.1 percent. China National Building Material Co. added 2 percent.
Investors on Wall Street were discouraged by the IMF report as well as expectations of lower corporate earnings. Analysts expect earnings for Standard & Poor's 500 companies to be lower than a year ago—the first time that has happened in almost three years.
The Dow Jones industrial average fell 0.8 percent to 13,473.53. The Standard & Poor's 500 index fell 1 percent to 1,441.48. The Nasdaq composite index fell 1.5 percent to 3,065.02.
Benchmark oil was down 40 cents to $91.99 per barrel in electronic trading on the New York Mercantile Exchange. The price of oil rose more than 3 percent Tuesday on concerns about supplies from the Middle East and the North Sea. The contract rose $3.06 to finish at $92.39 per barrel.
In currencies, the euro fell to $1.2861 from $1.2880 late Tuesday in New York. The dollar was nearly unchanged at 78.20 yen from 78.22 yen.