Initial tests have shown the 5,000 litres of 'liquid' seized contained enough methanol to be a serious health risk, potentially even causing blindness in those who drink it.
Fears grew Monday after eye-witness reports suggested a few bottles of the liquid, which traded under the name '1806 Christoff', was already in shops and pubs.
The find is a potential blow to government and industry efforts to stamp out alcohol fraud in the UK spirits sector.
Officials from HM Revenue & Customs (HMRC) raided the illegal bottling plant, based in central Cardiff, late last week.
They found 5,000 litres of fake vodka already bottled up and 20,000 empty, one-litre bottles, a spokesperson for HMRC said.
He warned the drinks trade to watch out for Christoff products.
Police arrested three men but they were later released.
Full testing to assess health risks posed by the products had not been published Monday night, but initial tests showed the liquid contained significantly higher methanol than would be found in legitimate vodka, Cardiff Trading Standards said.
Consumers were warned not to drink the products, in a 'precautionary' alert put out by the Food Standards Agency (FSA).
Effects of methanol poisoning include abdominal pain, drowsiness and dizziness, blurred vision that can lead to blindness, and breathing difficulties, the agency said.
It remained unclear Tuesday morning how widely the products may have been distributed.
"We are seeking information for other local authorities to identify any distribution of this product," said a spokesperson for the FSA in Wales.
Early indications in the HMRC's investigation are believed to show the illegal bottling plant had not been in operation very long.
Reports of products from the plant in local shops may raise questions about the success of the government's Duty Stamps scheme, however.
The system was designed to drown out fraud and tax evasion in spirit drinks by requiring all producers to have an official duty stamp on products.
An HMRC spokesperson told Beveragedaily.com that whilst the Cardiff raid set " a new benchmark" in the area for drinks fraud, "it is not as though this is happening week in week out".
Lost tax revenue from the Christoff operation was estimated at around £500,000.
In another high profile raid, an illegal spirits distillery was uncovered by HMRC officers near Manchester in October 2005.
Tax losses there were estimated at £690,000.