The operation reportedly involved “hundreds” of workers repackaging second hand smartphone parts as new iPhones for export, with the counterfeit phones produced worth 120m yuan ($19m).
The factory was discovered on 14 May but was revealed on social media by Beijing’s public security bureau on Sunday, according to reports.
The operation was set up in January.
It was led by a husband and wife team, on the northern outskirts of the Chinese capital, according to Beijing authorities.
They said they had been alerted to the factory by US authorities which had seized some of the fake phones.
The reports come amid an official Chinese crackdown on counterfeit goods, with authorities pushing firms to trademark their goods.
China has also agreed to work with the US authorities to try to stem the large quantities of fake goods flowing between the two countries.
The discovery of the factory comes four years after fake Apple stores were found in Kunming city, China.
Discovered by blogger Bird Abroad, the fakes were so convincing she said many of the staff themselves were convinced that they were employed by the US electronics firm.