Dazhai, in southwestern Yunnan, is the latest of three large-scale focal points of poisoning reported in the Chinese state media over the past month.
The reports say more than 200 children in Dazhai and nearby Yingpan village have been found to have excessive levels of lead in their blood.
Locals blame metal processing factories such as aluminium and copper smelting plants in a nearby industrial park for the pollution which they say has affected them and their farmland for a decade.
But the local environmental protection bureau denied any direct link with industrial pollutants, saying the cases had been caused by factors such as exhaust emissions.
Two earlier poisoning incidents in August – in northern Shaanxi and in central Hunan province – resulted in more than 2,100 children testing positive for high lead levels.
The government has also been accused of cracking down on protesting parents.
Police on Wednesday detained more than a dozen parents for a violent protest in Hunan province, saying they were linked to the banned Falun Gong spiritual movement.
The Wugang city public security bureau, which oversees Wenping, issued a notice on saying "cult members with ulterior motives" had led a number of villagers to block roads, attack government offices and damage public property, Dai Zuoyi, a resident, was reported by The Associated Press as saying.
|Angry parents have stormed factories they blame for widespread lead poisoning [AFP]
But villagers said it was an excuse to target parents involved in unrest in August after more than 1,300 children were poisoned by emissions from a manganese processing plant.
Gail Rachlin, a New York-based spokeswoman for the Falun Gong movement, condemned the government actions, saying that instead of addressing the source of grievances, authorities are "spinning them in an effort to further vilify" practitioners.
Lead poisoning can damage the nervous and reproductive systems and cause high blood pressure, anaemia and memory loss.
It is especially harmful to young children, pregnant women and foetuses, and the damage is usually irreversible, according to the World Health Organisation.
China is the world's top producer of lead.