Many children's bath products contain chemicals that may cause cancer and skin allergies, according to a report released Thursday by the Campaign for Safe Cosmetics.

Twenty-three of 28 products tested contained formaldehyde, the report says. Formaldehyde, considered a probable carcinogen by the US Environmental Protection Agency, is released as preservatives break down over time in a container.

Thirty-two of 48 products contained 1,4-dioxane, also considered a probable human carcinogen by the EPA, is a byproduct of a chemical processing techniques used to make petroleum-based ingredients gentler to the skin. Nearly two-thirds of products tested, contained both chemicals, according to the campaign, a coalition of environmental and health groups that includes the Breast Cancer Fund and the Environmental Working Group.

The European Union has banned 1,4-dioxane from cosmetic products. And formaldehyde is not allowed in cosmetics sold in Japan and Sweden. Analytical Sciences, an independent laboratory in Petaluma, California, performed the tests.

Baby Magic ''Soft Baby Scent'' Lotion contained the highest levels of formaldehyde found in the testing. Two samples of the lotion contained 570 and 610 parts per million (ppm) of the chemical. The report noted that a formaldehyde level above 500 ppm would require a warning label in Europe.

Several samples of ''American Girl'' shower products, sold by Bath & Body Works, contained the highest levels of 1,4-dioxane found in the test. Best-selling products found to contain both chemical contaminants included Johnson's Baby Shampoo, Sesame Street Bubble Bath, Grins & Giggles Milk & Honey Baby Wash and Huggies Naturally Refreshing Cucumber & Green Tea Baby Wash.

Manufacturers have known for years that bubble bath, shampoo and other products contain small amounts of formaldehyde and 1,4-dioxane, and have already reduced theses levels significantly, says John Bailey, the council's chief scientist. He says that preservatives make products safer by preventing the growth of bacteria, fungus and other potentially harmful microbes. There's no reason to take "extraordinary measures" to further reduce levels of these chemicals, he says, because there's no evidence to prove that low levels pose a risk.

"Cosmetic and personal care product companies take their commitment to safety and their responsibilities under the law very seriously and work hard to earn and keep the trust of consumers and their families," Bailey said in a statement. "Parents should be given complete and accurate information about their products based on sound science rather than on incomplete and alarmist reports."

A report released last week by the Organic Consumers Association found that makers of many personal products and household cleaners have significantly reduced levels of 1,4-dioxane in the past year. The study found that products bearing the US Department of Agriculture Organic seal, such as items by Dr. Bronner's, Intelligent Nutrients and Terressentials, were free of 1,4-dioxane.

Brands that have sharply reduced levels of 1,4-dioxane since March 2008, when the association released its last report, include: Earth Friendly Products, Ecco Bella, Giovanni, Jason, Johnson & Johnson, Kiss My Face, Life Tree, Method, Nature's Gate, Planet Ultra and Seventh Generation, which contributed $10,000 to fund the Organic Consumers Association study.

In a statement issued late Wednesday by Johnson & Johnson, the company charged that the report ''inaccurately characterisd the safety of our products'' and ''unnecessarily alarms parents.''

''The trace levels of certain compounds found by the Campaign for Safe Cosmetics can result from processes that make our products gentle for babies and safe from bacteria growth,'' the statement notes. "The FDA and other government agencies around the world consider these trace levels safe, and all our products meet or exceed the regulatory requirements for every country where they are sold.''

Limited Brands, which owns Bath & Body Works, issued a statement Thursday noting that the company complies ''with all applicable regulations and is committed to selling only the safest and highest-quality products.''

In a written statement, the cosmetics industry group characterized the CSC report as ''incomplete and alarmist.''

''Allegations that commonly used baby products are somehow contaminated with harmful levels of carcinogenic chemicals are patently false and a shameful and cynical attempt by an activist group to incite and prey upon parental worries and concerns in order to push a political, legislative, and legal agenda,'' the statement notes.

The CSC report calls for stronger government regulation to prohibit toxic contaminants in baby and other personal care products. And it calls on the industry to reformulate their products to remove the contaminants.