Feng Jiamei, from Shaanxi province, was made to undergo the procedure in the seventh month of pregnancy, local officials said after investigating.
Ms Feng was forced into the abortion as she could not pay the fine for having a second child, US-based activists said.
Rights groups say China's one-child policy has meant women being coerced into abortions, which Beijing denies.
"Feng Jianmei's story demonstrates how the One-Child Policy continues to sanction violence against women every day," said Chai Ling of the US-based activist group All Girls Allowed.
The group says it spoke to Ms Feng and her husband Deng Jiyuan after the incident. Mr Deng said his wife had been forcibly taken to hospital and restrained before the procedure.
Allegations are nothing new in China, but what has made this one different is a widely circulated photo of the woman lying next to the baby's corpse.
Media reports from China says Ms Feng has been traumatised by what has happened.
'Harmed image of family planning'
Unnamed local officials in Zhenping county - where the incident took place - denied forcing Ms Feng to have the abortion, local media reports say.
But a preliminary investigation by the Shaanxi Provincial Population and Family Planning Commission confirmed the forced abortion had taken place.
Without naming Ms Feng, it said in a statement that the woman had been seven months pregnant.
"Such practice has seriously violated the relevant policies set by national and provincial family planning commissions, which harmed the image of our family planning work, and caused extremely poor effects in society," said the statement.
"Based on the findings, we have requested the local government to punish the relevant officers according to law," it said.
Internet users expressed outrage.
"This is what they say the Japanese devils and Nazis did. But it's happening in reality and it is by no means the only case... They [the officials] should be executed," one reader on news website netease.com said, according to the AFP news agency.
Activist Chen Guangcheng, who was put under virtual house arrest for campaigning against forced abortions, fled China to the US last month.
Source: BBC News