A lawsuit filed on Tuesday claims that high levels of lead have been found in paint used to decorate the outside of glass Coca-Cola bottles and also in the drink itself.
"Millions of bottles of this product have been handled and consumed by Californians over the past four years without any warning of the danger they pose," the court papers said.
The suit, filed by Bill Lockyer, the California attorney general, and Rocky Delgadillo, LA's city attorney, alleges that company officials knew consumers were being exposed to unsafe levels of lead.
Drink 'is safe'
However, Coca-Cola said in a statement that it would "vigorously defend itself" against the "outlandish allegations".
"All Coca-Cola beverages, including those made in Mexico, are safe and comply with all laws," Ray Steed, a Coca-Cola spokesman, said on Tuesday.
The Mexican-bottled version of the leading soft drink is sweeter than its US counterpart and is imported to feed demand from California's large Mexican population, the lawsuit adds.
Lockyer and Delgadillo reached an agreement with Coca-Cola rivals PepsiCo in April, in which the company agreed to prevent lead-contaminated bottles from being distributed in the state, according to the lawsuit.