The eThekwini municipality has issued a warning not to drink water directly from the Umngcwini stream, in the west of the municipality, after a chemical fire about 10 days ago.
The city said that water samples from the area "indicated elevated levels of mercury".
This comes after a massive blaze last Sunday at the Metallica Chemicals factory in the Cato Ridge area.
"Members of the public are also cautioned against allowing livestock to drink from the water or from irrigating crops using water from the stream until further notice," the city said.
The Sunday Times reported this week that the factory had stored 3,000 tons of mercury waste for more than 20 years.
A mysterious fire at the plant on Sunday August 25 destroyed about 30% of the waste stockpile, potentially causing toxic air pollution.
Metallica Chemicals is affiliated to British company Thor Chemicals, which was processing mercury in the UK until airborne pollution concerns forced it to stop in the 1970s.
