More than 50 people from across the UK have contacted the local authority after being posted the forgeries, which feature the City of Edinburgh Council logo and a signature purporting to be from its finance chief.
The con artists have been e-mailing hundreds of sellers who advertise on websites such as Auto Trader and offering to buy their vehicles with a council cheque. The fake cheques have been made out for sums between 6000 and 10,000, although it is not known how many victims have fallen prey to the scam.
The criminals make out the cheques for sums above the asking price, but ask for the difference, minus an "administration fee", to be wired back to them. The full amount may show up when someone pays the cheque into the bank while it waits to clear, but when the cheque bounces days later, they may already have transferred their own money into the hands of the gang.
Last week, the Evening News reported a similar scam centred around the Gumtree website, which has cost 50 victims in the Lothians as much as 150,000. They were tricked into sending cash by wire transfer after being "hired" for fake jobs advertised on the site and sent a fake cheque.
Police and council chiefs today warned the public to be on their guard against the con, which is believed to involve international gangs.
Marc Warren, a 22-year-old call centre worker from Kent, was trying to sell his Honda NSR bike on the Auto Trader website for 1800. He said: "Only a couple of days after I put up the advert I got an e-mail from someone claiming to be a businessman in the US. The e-mail said he would send a cheque for 3000 to pay for the bike and the shipping costs and I only had to send back the difference, minus an administration fee for myself.
"The cheque arrived last Monday and I thought it looked suspicious. It had the City of Edinburgh Council logo on it from the council's website and it was signed to me. But it seemed like a laser printing of a cheque.
"I contacted the council and they said it was a fake and about 50 people had contacted them with similar stories. I've ended up with several different variations of the same e-mail being sent to me offering to buy the bike with a cheque. I haven't had one genuine response."
The fake cheques are similar to the council Royal Bank of Scotland cheques and appear to show the signature of the head of finance, Donald McGougan. The payee details have usually been filled in by hand, however, and this would not occur on a council cheque.
The sellers contacted all live outside Edinburgh. It is believed the gangs are using the council name in the hope people from outside the city might be tricked into believing it was common practice by the local authority.
Councillor Gordon Mackenzie, the city's finance leader, said: "We would urge people to be cautious when it comes to getting paid for items they are trying to sell. In particular, do not be persuaded to send money on to someone you do not know."
A police spokesman said: "Anyone who has any suspicions over the origins of any cheque they receive should get in touch with the police."