In a report on Wednesday, Human Rights Watch warned that Beijing's heavy-handed methods of controlling information about the disease could hinder efforts to stop its spread.
It called on China to remove restrictions on private groups that work with Aids patients and at-risk groups.
"Grass-roots organisations have direct experience that could greatly strengthen the country's fight against Aids," said Sara Davis, the group's China researcher.
"But in a number of regions, they face harassment, censorship and even beatings because the Chinese government is suspicious of any activity outside its direct control."
Separately, the United Nations' top HIV/Aids official, Peter Piot, also called on Beijing to work more with patients at the grass-roots level.
"If China is going to be successful in the fight against Aids, it needs not only the strong leadership ... but also involving people living with HIV in these activities at a community level, and there we still have a way to go," he said.
Piot met China's Premier Wen Jiabao this week and toured treatment centres in the country's south.
Premier Wen accompanied Piot
on tours in the country's south
Human Rights Watch said that despite the government's vows to fight Aids, many local officials fear public discussion of the disease will embarrass them or discourage investment.
In Henan province, where thousands of people were infected with HIV in the 1990s by an unsanitary blood-buying scheme, activists have complained of inadequate services for patients and of corruption in administering programmes, it said.
"Instead of addressing these criticisms, Henan officials have detained those activists who complained too loudly or who took matters into their own hands," the group said.
"Dozens of activists have been jailed, and some have even been beaten by thugs hired by local officials."
The group said China's internet restrictions are interfering with the flow of Aids information to high-risk groups such as homosexual men.
"China's laws on pornography say that any website with homosexual content is automatically considered to be obscene," Davis said.
"That's not only discriminatory; in the context of the Aids epidemic, it is self-destructive."
China says 840,000 people in the country are HIV-positive and 80,000 have developed Aids. The UN has warned that 10 million people could be infected in China by 2010 without better prevention.
"Time is running out. Now is the time for initiating large-scale programmes. The time of pilots is over"
UN HIV/Aids official
Right now, Aids in China is limited mostly to certain groups - sex workers, intravenous drug users, and victims of the blood-buying scheme - and the UN has warned repeatedly that it risks being spread quickly to the general population.
"Time is running out," Piot said. "Now is the time for initiating large-scale programmes. The time of pilots is over."
Wen told UN officials that China is up to the task of controlling the disease, citing plans to expand free medical service to Aids patients and increase public education about how the disease is spread, state media reported.