Activists say tens of thousands of people in Bhopal - many not even born at the time of the disaster - still suffer chronic illnesses related to the leak.
They say children born to parents exposed to the gas leak or poisoned by the contaminated water are suffering from cleft lips, missing palates, twisted limbs, varying degrees of brain damage and a range of skin, vision and breathing disorders.
The state government says it has complied with a 2004 High Court order to clean up the waste at the site but critics say only a partial clearance of toxins was done.
Studies released on the eve of the anniversary said more than 350 tonnes of toxic waste strewn around the site still pollutes soil and groundwater in the area, leading to cancer, congenital defects, immunity problems and other illnesses.
The UK-based charity Bhopal Medical Appeal (BMA) said on Tuesday that there was evidence that "high levels of toxic chemicals" remained in the drinking water supply in 15 communities near the plant.
Tests at Swiss and British laboratories indicated concentrations of some toxins were actually rising "as the chemicals leach through the soil and into the aquifer", it said.
The group said the government was not providing enough clean drinking water, forcing many residents to use the contaminated groundwater.
"Not surprisingly, the populations in the areas surveyed have high rates of birth defects, rapidly rising cancer rates, neurological damage, chaotic menstrual cycles and mental illness," BMA said in the report.
A separate study also released on Tuesday by the Centre for Science and Environment (CSE), showed a hand-pump 3km from the former Union Carbide plant contained 110 times the maximum concentration of the pesticide carbaryl deemed safe in Indian bottled water.
|New studies say the area around the abandoned plant remains contaminated [AFP]
The state government says residual chemicals in the ground are harmless and it is providing clean water to residents by tankers.
It also dismisses assertions that the birth defects are related to the disaster.
But the protesters gathered for Wednesday night's vigil disagreed, demanding the government clean up the chemical waste from the site and the drinking water in the area.
They also called for an official panel to work on social, economic and medical rehabilitation for the gas victims, saying that only part of the $470m compensation Union Carbide paid in settlement with the Indian government has reached victims.
Union Carbide, which ran the Bhopal plant when the leak occurred, is now a subsidiary of Dow Chemical, having been bought in 2001.
Dow says responsibility for the factory now rests with the Madhya Pradesh government.