Villagers sort through plastic in Bangun for the better-quality material they can sell |
Environmental group IPEN found, in one East Java village, toxic dioxins in chicken eggs 70 times the level allowed by European safety standards.
Long-term exposure to the chemicals is linked to cancer, damage to the immune system and developmental issues.
Indonesia's government says it is sending the waste back to countries.
The BBC's Victoria Derbyshire programme also spoke to people with respiratory issues caused by the fumes from the burning of plastics, and filmed the open burning of plastics supposedly sent to Indonesia to be recycled.
Researchers from IPEN (the International Pollutants Elimination Network) collected free-range chicken eggs at two sites near Surabaya, in East Java.
Testing eggs, the researchers said, was the easiest way to check whether the chemicals known as persistent organic pollutants (POPs) such as dioxins had made it into the food chain.
The most serious reading was taken near a group of tofu factories that burn plastics for fuel, in the village of Tropodo.
The tests found eating one egg would exceed the European Food Safety Authority (EFSA) tolerable daily intake for chlorinated dioxins 70 times over.
Researchers said this was the second-highest level of dioxins in eggs ever measured in Asia - only behind an area of Vietnam contaminated by the chemical weapon Agent Orange.
The eggs also contained toxic flame-retardant chemicals, SCCPs and PBDEs, used in plastics.
One resident in Tropodo said it was known as the "city of smoke".
"We don't need to tell the doctor what our symptoms are... we just tell them that we are from Tropodo and they know right away."
Experts believe eating a few contaminated eggs would not impact health - but long-term exposure could lead to serious problems.
"The results of our research are some of the most shocking we have ever had. In Indonesia, we've never had these results before," explained Yuyun Ismawati, a leading Indonesian environmentalist behind the tests.
Dr Agus Haryono, from the Indonesian Institute of Sciences, said the country's government needed to implement "a proper infrastructure for testing and monitoring POPs [Persistent Organic Pollutants]" to combat the "uncontrolled cross-border plastic trade".
The researchers focused on the area around a paper factory in East Java, where around 40% of its paper is imported. But the paper is arriving contaminated with low quality plastic.
The plastic is then sold to local villagers, many of whom rely on the plastic for their livelihoods.
One so-called "plastic farmer" in the village of Bangun, Supiyati, told the BBC she made a living by searching through plastic waste to sell the better-quality material to plastic factories.
"I used the money to buy this land and to send my children to school," she said, sitting among large mounds of plastic bought by the lorry-load by residents and divided up.
Imports of plastic waste rose 141% last year to 283,000 tonnes - primarily from countries such as Australia, Canada, Ireland, Italy, New Zealand, the UK and the US - according to Indonesia's statistics agency.
China imposed a ban on waste imports to the mainland at the start of 2017, leading to a huge influx of waste being sent to other countries.
Prof Peter Dobson, from the University of Oxford, believes Western countries exporting their plastic waste must also be held accountable.
"A ban would encourage the development of technologies to recycle or re-use waste plastic, or to discourage the wide use of plastic," he said.
Experts say Western waste is one part of the problem when it comes to tackling plastic in Indonesia.
They cite a lack of infrastructure and funding for waste collection, which means large amounts are fly-tipped in rivers or burned.
In Sindang Jaya, on the other side of Java, local chief Masrur claimed he had seen numerous people have respiratory problems due to the fumes created when plastics are burned.
One resident, Mila Damila, said her granddaughter had been hospitalised four times.
"The doctor said her illness was caused by the smoke," she said. "It looks like fog, but it's smoke. It's black in the afternoon."
Another local, Eli Prima, said his daughter was taken into the emergency unit and placed on an oxygen tube because she had difficulty breathing.
Much of the larger-scale, open burning of plastic in the area has now been stopped after "tense" discussions with plastic traders.
And there is evidence that suggests government policy is having an impact.
Individuals are still burning waste, but the flow of new imported waste in Sindang Jaya is beginning to dry up.
The BBC also saw lorries with containers parked up outside plastic factories in Sindang Jaya that had been seized by Indonesian customs, suggesting they might contain contaminated waste.
But while there may be less waste entering Indonesia, there is concern about where it is ending up.
Recent research by the environmental group Basel Action Network found many containers that were intended to be sent back to the West ended up in other South-East Asian countries. BBC