Police raided the factory, which was hidden inside an alcohol and drug rehabilitation center, after a worker escaped and informed authorities, Mexico City Attorney General Miguel Angel Mancera said Thursday.
Twenty three people were arrested for human trafficking.
The freed workers, whose ages ranged from 14 to 70, were forced to work for 16 hours a day, with just a 30-minute break.
Most were from indigenous communities and didn't speak Spanish. They were abducted or lured from communities across Mexico and taken to the St. Thomas-The Chosen by God rehabilitation center, Mancera told a press conference.
Mancera said the workers were fed chicken feet and rotten vegetables. Many were suffering from dehydration and malnutrition, and some had cuts and broken bones.
"Victims were experiencing inhuman, unhealthy and extreme mistreatment that included sexual abuse," Mancera said.
Mancera said the rehabilitation center in Mexico City's populous Iztapalapa district had been open for at least eight years.
But he didn't say for how long the factory had been operating or where the shopping bags and clothing clasps were sold.
He also didn't say how many were men and how many were women.
In related news, a senior U.S. official said the global economic crisis may be driving more people into forced labor and other forms of modern-day slavery.
Luis CdeBaca, the U.S. ambassador for human trafficking issues, said Friday while visiting Hong Kong that harder economic conditions have had a "driving effect" as labor recruiters exploit the poor with false promises of better jobs.
He said migrants are taking more risks because of "increased desperation after the crash."
Victims are often promised higher-paying jobs, only to find themselves deep in debt and virtual slaves working for little money in jobs such as domestic helpers or prostitutes.