Tiangong-1 is packed with rocket fuel hydrazine which could also cause nerve and liver damage after long-term exposure.
Most of the satellite is expected to burn up when it re-enters the atmosphere in March but up to 40% could survive as debris.
Aerospace Corp which provides advice and technical guidance on space missions has raised fears about exposure to the lethal chemical, reported Mail Online.
A statement said: "Potentially, there may be a highly toxic and corrosive substance called hydrazine on board the spacecraft that could survive re-entry.
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