Al Jazeera uncovered a "black jail" in April, but the Chinese government flatly denies their existence.
At a protest on Monday in a park in Beijing, many of the petitioners told AP Television that they had been detained in "black jails".
"The biggest problem is... detainees are subjected to abuses ranging from sexual violence, physical violence, denial of food, sleep and medical treatment, as well as theft and extortion"
Phelim Kine, HRW researcher
Yang Qiuyu, a petitioner for housing rights, alleged petitioners have been "beaten" or "locked in mental institutions".
Zhang Tianhui, a petitioner from Chengdu, said she had been detained illegally for more than "five months" in a "black jail".
"So we came to Beijing to petition, and they put us in a black jail for more than five months," Zhang said.
The report also comes days before Barack Obama, the US president, is scheduled to visit China. Obama told the Reuters news agency he will press China on human rights during his four-day visit starting Sunday.
"I think it shows a lot about the Chinese government not necessarily being interested in defending the downtrodden or upholding domestic or international obligations," Sophie Richardson, who oversees HRW work on China, said in Hong Kong.
"I think the Obama administration is being tested, it's the first visit to Beijing and I think they're [China] pushing back hard to see just how far they can get, to keep cranking the human rights bar lower, and lower and lower."
According to the HRW report, the "black jails" were driven by coercion and commerce, with officials and hired guards holding petitioners in squalid, sometimes brutal confinement without legal oversight, often in return for cash.
The petitioners were allegedly held for days or months at a time in makeshift detention centres where most were deprived adequate food and sleep, beaten and threatened.
|Al Jazeera uncovered a 'black jail' in April but the government flatly denied its existence
HRW said police in Beijing and other cities are aware of "black jails" but ignore them because they keep potentially troublesome petitioners away from cities, and have in some cases even "directly assisted black jail operators".
It has urged the Chinese government to abolish the secretive facilities and investigate those who operate them.
The HRW report also cites an alleged internal government directive given to authorities in Shimen, a county in south China's Hunan province, in 2007 about a point system for local officials who bring back petitioners from Beijing.
Officials typically pay "black jails" between $22 to $44 per day to hold petitioners until they can be picked up and returned home, it said, and estimates that up to 10,000 people are detained per year, including some people who are detained on multiple occasions.
Phelim Kine, a researcher with HRW, said "black jails" were found all over China.
"Obviously the biggest problem is that in these secret, unlawful detention centres, detainees are subjected to abuses ranging from sexual violence, physical violence, denial of food, sleep and medical treatment, as well as theft and extortion."