The 512 municipal officials in Hunan province resigned, were disqualified or dismissed after being caught taking bribes from 56 representatives of the provincial People's Congress to elect them to their posts, Xinhua news agency said.
Municipal officials have the power to appoint representatives of their provincial assembly, the local rubber-stamp parliament, although the process does not constitute a fully free or open election.
Local authorities dismissed 56 representatives of the 763-strong Hunan People's Congress for being "elected by bribery", state television channel CCTV said on its Twitter account.
An initial investigation revealed that 110 million yuan ($18 million) was offered in bribes to lawmakers and staff in the province's second city of Hengyang, state media reported, citing a Hunan government statement.
"The fraud, involving such a huge number of lawmakers and a large amount of money, is serious in nature and has a vile impact," Xinhua quoted the statement as saying.
"This is a challenge to China's system of people's congresses, socialist democracy, law and Party discipline".
It named Tong Mingqian, the former Party chief of Hengyang, as being "directly responsible" for the election scandal.
President Xi Jinping has led a high-profile clampdown on China's notoriously corrupt officialdom since taking power last year, promising to stamp out both high-level "tigers" and low-ranking "flies", amid widespread anger over official corruption.
On Friday a court sentenced four government workers in Hunan to between three and a half and 11 years in jail over the death of 56-year-old watermelon seller Deng Zhengjia in July.
Domestic media blamed Deng's death on the local enforcement officers, or "chengguan", in a case that triggered fury among the public over perceived abuse of power.