The system requires residents from areas that have substantial Tibetan or Muslim populations to provide more extensive documentation than other citizens, and has led to waits of up to five years or outright refusals of passports without explanation, the group said.
The government has intensified controls over ethnic minority groups who have protested against Chinese rule, fearing instability in the sensitive border regions in which they live.
The system for getting a passport would appear to be part of government attempts to stop travel for certain forms of religious study and pilgrimage, such as attending an event abroad by the Dalai Lama, the exiled Tibetan spiritual leader, Human Rights Watch said.
Read: China steps up controls in unruly Xinjiang as Ramazan approaches
"Chinese authorities should move swiftly to dismantle this blatantly discriminatory passport system," Sophie Richardson, China director at Human Rights Watch, said in a statement.
The Foreign Ministry directed questions to the Ministry of Public Security, which did not respond to a request for comment.
The government has repeatedly rejected criticism of its policies in minority areas, saying it has provided much-needed economic growth to underdeveloped regions.
Read: Suppressing religious freedoms: Chinese imams forced to dance in Xinjiang region
Human Rights Watch said its findings were based on a study of official documents, websites, news sources, social media and interviews with people from the Tibet Autonomous Region.
In the Tibet Autonomous Region, authorities had imposed a "near-total ban" on the issue of ordinary passports, the group said.
In 2012, authorities in the Tibet Autonomous Region recalled all ordinary passports. Since then, they had virtually "not issued any replacement passports or new passports except for travellers on official business and a small number of cases that appear to have been overlooked", the group said.
Read: China upset with Turkey's concern on Ramazan restrictions
China has a fast-track passport system in areas largely populated by majority Han Chinese and to ethnic minority people who apply from these areas, it said.
The report came days after Thailand deported nearly 100 ethnic minority Uighur Muslim people back to China, sparking international criticism. Thailand said it had rejected a Chinese request to return all Uighurs held in detention camps.
China has expressed concern about the rise of the Islamic State, and about Chinese citizens joining the group in the Middle East, and the impact they could have on its western Xinjiang region, where most Uighurs live.
COMMENTS (10)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ