The environmental group Greenpeace says genetically modified (GM) rice is being sold in China even though it has not been approved for public consumption.
China has been testing GM crops for years
The group said the rice was being sold in markets in central Hubei province and it may have contaminated exports.
A Greenpeace spokesman said the government was in effect experimenting on the Chinese people.
Chinese government scientists told the BBC they were unaware of any illegal sales of GM rice.
China has been testing genetically modified rice for years and is expected to approve a strain for commercialisation soon.
Greenpeace says it made the discovery after interviewing farmers and seed companies and testing rice samples from the area.
Liu Haiying, programme director for Greenpeace in Beijing, said campaigners bought rice and seeds that had been engineered to produce the protein product of the bacterium Bacillus thuringiensis (Bt). The protein is toxic to insect pests.
He said the Bt-GM rice was being sold at markets in Wuhan and a nearby suburb, and in two cities in Hubei.
Greenpeace campaigner Sze Pang Cheung said the genetic engineering industry was "out of control".
"A small group of rogue scientists have taken the world's most important staple food crop into their own hands and are subjecting the Chinese public to a totally unacceptable experiment," he said.
Professor Zhen Zhu, a government scientist at the Institute of Genetics Development Biology, in Beijing, told the BBC he was not aware GM rice was being sold illegally.
He said experiments involving GM rice in China met international safety standards.
Prof Zhen acknowledged that cross-pollination from GM crops could have contaminated other paddy fields but, he said, measures had been taken to prevent this.
China is a major exporter of rice. Greenpeace warned the modified crop could have reached other countries, including Japan and South Korea, which are large consumers of GM foods.
Greenpeace urged the Chinese government to recall unapproved GM rice and investigate how it came to be sold.
WHERE THE WORLD'S GM CROPS ARE GROWN
Others: 0.3 mha (Australia, Bulgaria, Colombia, Germany, Honduras, India, Indonesia, Mexico, Philippines, Romania, Spain and Uruguay)