The US-based group Human Rights Watch says it has heard dozens of credible accounts of torture and beatings by police in East Timor.
In a report issued on Wednesday, the group calls on the East Timorese government to take urgent action to prevent such abuse becoming routine.
The former Portuguese colony was ruled by Indonesia for nearly 24 years before a UN-sponsored referendum in 1999.
East Timorese police chief Paulo Martins denied the torture charges.
"We treat our prisoners finely and in line with procedures," the Associated Press news agency quotes him as saying.
He urged Human Rights Watch to send him proof of abuse.
Human Rights Watch says it interviewed dozens of witnesses and victims of police abuse.
"We were shocked to find so many credible accounts of torture and severe ill-treatment by police officers," said Brad Adams, the group's Asia director.
One of the victims mentioned in the report says he was "continuously tortured, sprayed with pepper spray, beaten and drenched with water".
Human Rights Watch says the government and independent oversight bodies have failed to take reports of police abuse seriously or discipline officers.
"East Timor's leaders are ignoring police abuse when they should be taking urgent steps to end it," Mr Adams said.
He added that the government risked emulating Indonesia, which was accused of widespread human rights abuses during its rule.
East Timor's truth and reconciliation commission found that more than 100,000 Timorese died as a result of the occupation.
Mr Adams said the document should serve as a "wake-up call" for international donors to express their concern.
The report urges donors to fund and plan strategies on training police in East Timor.
After three years of UN rule, East Timor became the world's youngest nation in 2002.