HM Revenue & Customs said the plant, on the outskirts of the city centre, could have cost taxpayers nearly Â£138m a year in lost duty and taxes.
Four lorry loads of tobacco, cigarettes and packing materials have been seized.
Ten men, aged between 26 and 40 from Brazil and Paraguay, were detained on suspicion of immigration offences.
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Customs officials said the building was kitted out with machinery able to produce and package cigarettes on an industrial scale.
The raid took place over several days last week but details have only just been released.
A number of men were detained by immigration enforcement officers.
A nearby residence was also searched.
Stuart Taylor, HMRC's Fraud Investigation Service assistant director, said: "Tobacco fraud costs the UK Â£2.4 billion a year in lost tax, money that should be funding vital public services in the UK."
Sajeela Naseer, Birmingham City Council's head of trading standards, said the investigation into the cigarettes recovered was continuing.
A suspected illicit cigarette-processing factory in Birmingham, thought to be capable of producing 35 million a month, has been shut down.