Hundreds of fish were killed when sewage spilled into a stream.
The waste leaked from a water pumping station in Hickstead, near Burgess Hill, suffocating wildlife.
The station is operated by Southern Water, which was recently named one of the worst polluters in the country after causing more sewage leaks in 2004 than any other water firm.
The leak in Hickstead was spotted on Sunday by a passer-by who saw the dead fish and called the Environment Agency.
The agency sent officers out to the scene to start a clean-up operation and investigate how it happened.
The sewage was discovered to be escaping from an overflow at Southern Water's Malthouse Lane Pumping Station.
The Environment Agency alerted the company, which sent out staff to stop the discharge.
Water samples were taken to establish the cause. The pollution has affected the stream from the pumping station to Twineham, killing about 200 fish.
Steven Usher, environment officer for the Environment Agency, said the sewage could take a while to clear because the summer drought meant the water level was below average.
He said: "Unfortunately it looks like a large number of fish have been killed in this stream.
"The low water flows we are experiencing at the moment mean that any sewage in the stream may take a long time to wash through.
"Sewage entering a river or stream can have a devastating effect on the wildlife living there.
"Nutrients in the sewage can break down and use up oxygen in the water, making it hard for fish to breathe.
"We take incidents like this extremely seriously and are launching a full and thorough investigation to establish exactly how sewage entered this stream and if this is what has killed these fish."
A spokeswoman for Southern Water said: "Southern Water staff attended the site as soon as they were made aware of the problem and are working closely with the Environment Agency.
"A full investigation into the cause of the incident has been launched."
Last month an annual Spotlight on Business report produced by the Environment Agency placed Southern Water third in a list of the firms that caused the most environmental damage in 2004.
The agency said the company had made some improvements since then.
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules hereComments are closed on this article