Former inmates claim they were beaten and raped in the jails
China is running a number of unlawful detention centres in which its citizens can be kept for months, according to campaign group Human Rights Watch.
It says these centres - known as black jails - are often in state-run hotels, nursing homes or psychiatric hospitals.
Among those detained are ordinary people who have travelled to Beijing to report local injustices.
Officials have denied such jails exist, despite earlier reports on them in international and Chinese state media.
'Punched and kicked'
The human rights group report, entitled An Alleyway in Hell, says ordinary people are often abducted off the streets and taken to illegal detention centres.
They are sometimes stripped of their possessions, beaten and given no information about why they have been detained.
Human Rights Watch said it collected information for the report by interviewing 38 detainees earlier this year.
"I asked why they were detaining me, and as a group [the guards] came in and punched and kicked me and said they wanted to kill me," one former detainee told the group.
"I loudly cried for help and they stopped but from then on I didn't dare [risk another beating]."
Many of those held are petitioners, people who travel to Beijing to present their complaints to the State Bureau for Letters and Calls.
This national government department is supposed to help ordinary people across the country redress their grievances.
But some petitioners are detained by plain clothes security officers when they arrive in Beijing.
This Beijing room was allegedly part of a black jail
The Human Rights Watch report cites unpublished local government documents to provide details on the economic structure underpinning the jails.
It says penalties are levied against local officials "who fail to take decisive action when petitioners from their geographical area seek legal redress in provincial capitals and Beijing".
The operators of the black jails receive cash payments of 150 yuan ($22; £13) to 200 yuan per person, "creating another incentive to employ forms of illegal detention", the report says.
"The existence of black jails in the heart of Beijing makes a mockery of the Chinese government's rhetoric on improving human rights and respecting the rule of law," said Sophie Richardson, Asia advocacy director at Human Rights Watch.
Outcry over deaths
The jails sprang into existence after a network of official police detention centres used to house people who did not have proper residence permits was closed in 2003.
Civilian authorities took over responsibility for running detention centres after China loosened its tight residency requirements that year to allow migrant workers to move more freely about the country to seek work.
Legal detention centres have also come in for criticism
The existence of the black jails has already been well documented by international media and rights groups and Chinese state-run media outlets have also reported on their existence.
The China Daily last week carried a report about the trial of a guard at a black jail accused of raping a 20-year-old woman who had been detained.
Despite that, Chinese Foreign Ministry spokesman Qin Gang on Thursday denied that China had illegal detention centres.
"I can assure you that there are no so-called black jails in China," he said at a regular news briefing.
But when pressed on the issue he added that there were "existing problems" that were being dealt with.
Black jails are just one aspect of China's detention system that have come in for criticism over recent months.
There has been a public outcry over the numbers of deaths in prisons and detention centres, a situation the government has promised to stamp out.