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.