The sources said between 500 and 1,000 Chinese citizens had used the network to obtain student visas to come to France.
Police were alerted after "a strong and constant" request for visas for Chinese students seeking to attend the same business school, which was not particularly well-known.
Upon investigation, police discovered the business school was a facade for an illegal immigration network.
The "students" paid between 3,000 and 5,000 euros ($3,250 and $5,425) in registration fees, and at least one million euros was laundered by members of the ring, said the police sources.
The head of the school and an alleged accomplice were arrested and six others placed under judicial review.
The business school was investigated on similar charges in 2012 and its former director was fired.
In 2010 a Parisian university filed a corruption complaint over the registration of fake Chinese students.