Xiao jie, I suppose you mean 小姐， was a honorific title like “miss” or “my lady” during the Republic of China in the first half of the 20th century. After the Communist takeover and the elimination of the classes, the term ceased to exist in mainland China, until it was reintroduced by overseas Chinese and Taiwanese after the reform and open up policy since 1978. It became quite popular in Chinese regions with more outside connection, until somewhere along the line, it was used to refer to hookers.
Now the term is again fading in mainland China, replaced with other words depending on the region. While it may still be acceptable to call a young woman as “xiao jie” in some regions in the South, in Northern China, you simply cannot use the word without the woman being refered to feeling uncomfortable or even offended, unless maybe you speak with a very strong Hong Kong or Taiwanese accent.