The Center for Global Policy said Chinese government documents and media reports showed at least 570,000 people in three Xinjiang regions were sent to pick cotton under a coercive labour programme targeting ethnic minority groups.
But it said the overall figure was likely to be several hundred thousand higher.
China’s Foreign Ministry spokesman Wang Wenbin dismissed the allegations.
“Helping people of all ethnic groups secure stable employment is entirely different from ‘forced labour’,” he told a media briefing in Beijing, adding that nearly 3 million people had been lifted out of poverty in the region.
He said all ethnic groups in Xinjiang were free to choose their occupations.
Researchers warned of the "potentially drastic consequences" for global cotton supply chains, with Xinjiang producing more than 20 per cent of the world's cotton and around a fifth of the yarn used in the United States coming from the region.
The BBC reported that it had asked 30 major international brands if they intended to continue sourcing products from China as a result of the findings. Of those that replied, only four said they had a strict policy of demanding that items sourced from anywhere in China do not use raw cotton from Xinjiang.
Beijing said that all detainees have "graduated" from the centres, but reports have suggested that many former inmates have been transferred to low-skilled manufacturing factory jobs, often linked to the camps.
But the think tank report said labour transfer scheme participants were heavily monitored by police, with point-to-point transfers, "military-style management" and ideological training, citing government documents.
"It is clear that labour transfers for cotton-picking involve a very high risk of forced labour," Adrian Zenz, who uncovered the documents, wrote in the report.
"Some minorities may exhibit a degree of consent in relation to this process, and they may benefit financially. However... it is impossible to define where coercion ends and where local consent may begin."
'Anti-China research organisation'
The report also says there is a strong ideological incentive to enforce the scheme, as the boost in rural incomes allows officials to hit state-mandated poverty alleviation targets.
China has strongly denied allegations of forced labour involving Uighurs in Xinjiang and says training programmes, work schemes and better education have helped stamp out extremism in the region.
When asked about the report on Tuesday, Beijing said workers "of all ethnicities in Xinjiang sign labour contracts with enterprises based on their own voluntary choice of occupation."
Foreign ministry spokesman Wang Wenbin also attacked the report's author Zenz, saying he was the "backbone of an anti-China research organisation set up under the manipulation of the US intelligence agency, which mainly fabricates rumours against China and defames China."
Earlier this month, the US banned imports of cotton produced by the Xinjiang Production and Construction Corps, a major paramilitary entity, which covers about a third of the crop produced in the entire region.
Another proposed bill banning all imports from Xinjiang has yet to pass the US Senate