Tests found that the DNA of some villagers in Liqian, on the fringes of the Gobi Desert in north-western China, was 56 per cent Caucasian in origin.
Many of the villagers have blue or green eyes, long noses and even fair hair, prompting speculation that they have European blood.
A local man, Cai Junnian, is nicknamed by his friends and relatives Cai Luoma, or Cai the Roman, and is one of many villagers convinced that he is descended from the lost legion.
Archeologists plan to conduct digs in the region, along the ancient Silk Route, to search for remains of forts or other structures built by the fabled army.
"We hope to prove the legend by digging and discovering more evidence of China's early contacts with the Roman Empire," Yuan Honggeng, the head of a newly-established Italian Studies Centre at Lanzhou University in Gansu province, told the China Daily newspaper.
The genetic tests have leant weight to the theory that Roman legionaries settled in the area in the first century BC after fleeing a disastrous battle.
The clash took place in 53BC between an army led by Marcus Crassus, a Roman general, and a larger force of Parthians, from what is now Iran, bringing to an abrupt halt the Roman Empire's eastwards expansion.
Thousands of Romans were slaughtered and Crassus himself was beheaded, but some legionaries were said to have escaped the fighting and marched east to elude the enemy.
They supposedly fought as mercenaries in a war between the Huns and the Chinese in 36BC – Chinese chroniclers refer to the capture of a "fish-scale formation" of troops, a possible reference to the "tortoise" phalanx formation perfected by legionnaries. The wandering Roman soldiers are thought to have been released and to have settled on the steppes of western China.
The theory was first put forward in the 1950s by Homer Dubs, a professor of Chinese history at Oxford University.
The Roman Empire reached its greatest territorial extent under the Emperor Trajan in the 2nd century AD, just as the Han empire was beginning to decline.
Most historians believe that the two empires had only indirect contact, as silk and spices were traded along the Silk Road through merchants in exchange for Roman goods such as glassware.
But some experts believe they could instead be descended from the armies of Huns that marauded through central Asia, which included soldiers of Caucasian origin.
Maurizio Bettini, a classicist and anthropologist from Siena University, dismissed the theory as "a fairy tale".
"For it to be indisputable, one would need to find items such as Roman money or weapons that were typical of Roman legionaries," he told La Repubblica. "Without proof of this kind, the story of the lost legions is just a legend."