Researchers subjected cultured human bladder and lung cells to e-cigarette vapor which is designed to avoid the carcinogenic byproducts of tobacco.
They found the cells mutated and became cancerous at a much higher rate than expected, and mice exposed to the smoke also suffered significant DNA damage.
The New York University team warns their findings, published today, bring into question the popular belief that vaping nicotine is a safe alternative to smoking it in cigarettes.
It comes just days after the Food and Drug Administration rejected Philip Morris's 'healthy' iQOS electronic vaping product, saying it is not healthier than tobacco.
E-cigarette smoke (ECS) delivers nicotine through aerosols without burning tobacco.
While tobacco smoke contains nitrosamines and many carcinogenic chemicals from burning, ECS contains nicotine and some relatively harmless organic solvents.
As a result, 'vaping', as it is colloquially called, has been promoted as not carcinogenic; a safer substitute for tobacco.
A recent study even found that e-cigarette smokers had 97 percent less lung carcinogens in their body fluids compared to tobacco smokers.
However, experts warn that does not mean it is safe and void of cancer risk.
The new study by Moon-shong Tang, of the environmental medicine department, was an investigation into the belief that other products in tobacco - not nicotine - are the ones that cause cancer and other health woes.
They subjected mice and human cells to the vapor.
They concluded that although vaping delivers fewer carcinogens than tobacco smoke, e-cigarette smokers might have a higher risk than nonsmokers of developing lung and bladder cancers and heart diseases.
Last week the FDA voted unanimously against Philip Morris International's claims that its e-cigarette could predict lower rates of diseases and death in humans.
The pen-like device heats Marlboro-branded sticks of tobacco but stops short of burning them.
It is already sold in more than 30 countries and Philip Morris aims to make it the first 'reduced risk' tobacco product ever sanctioned by the US.
FDA clearance would mark a major milestone in efforts by both the industry and government officials to provide alternative tobacco products to US smokers.
The adult smoking rate has fallen to an all-time low of 15 percent, though smoking remains the nation's leading preventable cause of illness and death.
More about: cancer