Drainage officials are investigating suspected illegal waste found in the water of Sha Tin's Shing Mun River, once famed for its foul smell.
A thick, orange-brown sludge floated downriver outside the Heritage Museum on Wednesday afternoon, shocking local residents.
"There are dead fish on a weekly basis and seeing small oil slicks is nothing new, but I have never seen anything like this," said Lara Terzian, who lives nearby. "My children saw it first. We were horrified."
Terzian described the substance as "slow-moving muck" which disappeared by evening.
The Drainage Services Department said it had sent staff to inspect the site and suspected it could involve illegal discharge of effluent.
"We have contacted the Environmental Protection Department and are now investigating," a spokesman said.
A rise in Sha Tin's population and waste from industrial, commercial, livestock and domestic sources heavily polluted the river in the 1980s. Water quality has improved significantly since then.
Sha Tin district councillor Gary Yeung Man-yui said the government had become "less proactive" in tackling pollution in the river. Though rowing and fishing have become commonplace on the water, Yeung said he still believed the river was "not suitable for such activities".
Wong Chi-yung, of the Democratic Alliance for the Betterment and Progress of Hong Kong's Sha Tin branch, said the discharge was likely to be oil or paint. Discharging polluted water or matter into waterways can carry a six-month prison sentence and a minimum fine of HK$200,000.