The Dunedin City Council has identified avian botulism, a disease that causes paralysis in birds and often kills them, at the Waikouaiti wastewater treatment plant, which is located close to the Waikouaiti Estuary.
"Avian botulism is a known risk at certain water bodies [including treatment ponds] across New Zealand," the council said in a statement.
"The bacteria occurs naturally in soils around ponds and wetlands and is also found in oxidation ponds. It is harmless until certain environmental factors occur, such as low oxygen and warm temperatures."
A council spokesman said the outbreak at the plant had nothing to do with the way it was operated.
The outbreak is unrelated to the recent avian influenza outbreak at a North Otago egg farm but is being treated as a significant animal welfare issue.
More than 1000 birds have died.
Otago Fish & Game chief executive Ian Hadland said the majority of the dead birds collected so far were native paradise shelducks, although the disease had also struck native grey teal, mallard, Canada geese, black swans and black-backed gulls.
Fish & Game was unsure whether the operating conditions of the wastewater treatment plant led to the outbreak.
"It's part of our questions for the city council, actually," Mr Hadland said.
"So we'll be making those inquiries [about the wastewater treatment plant] to find out what was it that actually led to this situation."
The council said it had "activated its management plan for collecting and disposing of dead birds and will continue for the next few weeks".
"This should help stop the spread and break the chain of infection."
