A blockage caused raw sewage to flow into the Mill Stream in Stamford.
It is believed that the waste ran into the waterway, alongside The Meadows, for at least two days.
The spill was the result of a sewer becoming blocked by a build up of fat and both the Environment Agency and Anglian Water attended the incident yesterday, after being alerted by a member of the public.
John Clare, from Anglian Water, said: "We were alerted to sewage spilling into the Mill Stream at Stamford yesterday and immediately went to investigate.
"A sewer in the town centre had become blocked by a build up of fat, causing sewage to back up and spill into the river through an overflow designed to take storm water.
"Work to clear the blockage using a jetter lorry continued throughout the night and this morning and our staff will remain on site to clear debris from the river.
"Anglian Water takes its responsibilties to the natural environment very seriously and we work hard to prevent this kind of spill from happening."
Mr Clare urged residents to think carefully about what they put down plugholes, toilets and drains.
"The consequences of blocked sewers can be very serious.
"This is especially true in areas like Stamford with older sewers, where there are often connections between the foul and surface water networks.
"Fat which slips easily down drains when warm quickly cools and sets hard once in the sewers, creating blockages that are incredibly hard to clear," he added.
A spokesman for the Environment Agency said investigators arrived at the Mill Stream at 4.30pm and, finding a blocked sewer, contacted Anglian Water.
"There was not a lot of flow on the river and the blockage was causing some changes to the colour of the water, which could indicate danger to fish and life in the side stream.
"Thankfully, there was no sign of any dead or ill fish.
"We will return to inspect the site after they have left to update our records," the spokesman added.
He urged anyone spotting something that may threaten the environment to telephone the Environment Agency hotline on 0800 80 70 60.