The city's quality and technical supervision bureau announced on Wednesday that the additive was discovered in bottled chilli oil produced by the Beijing Tianfu Food Co. A total of 640 boxes of pepper products, including chilli oil and chilli sauce, have been sealed up.
Sudan Red is suspected of being carcinogenic but it has recently found its way into numerous products reaching the European market.
Tianfu Food's chilli oil was previously found to contain Sudan I in March. A sample test by authorities showed that it was present again in a batch dated October 1, 2005, and a follow-up raid on the company found that its August 17 batch also contains the chemical.
All 1,600 bottles of oil produced on October 1 were sold out, mostly to self-employed vendors in northern Beijing's Changping Shuitun Market and Dazhongsi Market, according to the paper.
A further investigation is being conducted on the material's sources.
The Food Safety Office under the Beijing municipal government issued an urgent notice on Wednesday evening banning chilli oil products by Tianfu in all stores, supermarkets and markets in the city. It was also noted that a purchase could be refunded with a shopping receipt.