SA Water says the incident was caused by a break-in at the Christies Beach Wastewater Treatment Plant.
It believes the sludge has been contained to Christie Creek, but 200 metres of Christies Beach has been closed to swimmers as a precaution.
One man said he thought someone had emptied their septic tank in the area due to the smell.
He labelled those responsible for the break-in and release of the sludge as “absolute morons”.
SA Health’s Dr David Cunliffe said if anyone swims in the contaminated water they could develop “a gastro-intestinal illness,” but this is a “worst case” scenario.
A clean-up has begun with SA Water, The Environment Protection Authority and SA Health to ensure the water quality is safe for swimmers.
Water samples have been taken in the area with the results to be available about midday on Tuesday.
– With AAP