Timber logged in the impoverished Pacific nation is exported to manufacturing hubs, mostly in China.
Timber logged in the impoverished Pacific nation is exported to manufacturing hubs, mostly in China, before being sent to other countries such as the United States as wooden flooring and other commercial products in a multi-billion dollar trade.
But Global Witness claimed about one-third of PNG timber in recent years came from land stolen from locals by the government and given to loggers. It said US firms could be violating American law if they fail to check the wood's legality.
"US consumers may be unwittingly fuelling what is one of the biggest land grabs in modern history," the NGO said in a statement after releasing its "Stained Trade" report based on a three-year investigation.
The activist group estimated that Chinese sales of wood products to the US were worth some $15 billion annually.
"The US Lacey Act bans the import of illegal wood. However, Global Witness found wood from PNG readily available on US markets in the form of flooring manufactured in China," it said.
Global Witness said US retail giant Home Depot's supplier Home Legend stopped selling hardwood flooring that contained PNG timber after they were informed of the findings.
It added that major Chinese flooring seller Nature Home was placing a "pause on new procurement" for the US market as it reviewed sourcing procedures.
But some of the other US companies which were contacted about the investigation did not respond, Global Witness said.
As part of its 2014-16 probe, the organisation interviewed dozens of people from local communities -- who rely on the forests as sources of food, water and medicine -- and who said they had lost their land to loggers.
"Tens of thousands of people have been affected," said campaign leader Rick Jacobsen, who claimed many who tried to speak out had been threatened, arrested or beaten.
Landowner-turned-activist Paul Pavol said such land was his community's "food and water, protein, building materials, medicines, beauty, warmth, and everything else", but that changed when logging machines were brought there in 2010.
"There were policemen on the barge... We were the first people to go up there and tell them, 'No, stop this!' When I see ships taking my logs away, I honestly cry.
"That's the reason we raise our voices. Something's got to be done to save our forest."
The PNG government has rejected previous allegations that logging was taking place on illegally obtained land.