Concerned members of the public contacted the council on Sunday afternoon after spotting bright green water gushing out of a stormwater pipe and into the picturesque lake, while hundreds of people gathered around to take photos and videos.
In a statement, the council said there had been "a lot of speculation" about what the substance might have been, but confirmed it was not associated with any council operations.
Comprehensive testing was under way but it could take "weeks to have a conclusive result".
Although it had similar characteristics to non-toxic water tracing dye, used for mapping waste and stormwater flows, if that was the case it was "certainly an unnecessary addition to an environment we work so hard to protect".
An Otago Regional Council spokesman said its pollution staff also responded to the incident on Sunday and remained in contact with the Queenstown Lakes District Council.
"While we believe it may be tracer dye, we are awaiting the outcome of testing being undertaken by QLDC to confirm this.
"While tracer dye is routinely used in stormwater networks the amount seen yesterday is far greater than we would normally expect to see."
The regional council used tracer dye "from time to time in carrying out our activities", however, "we did not have any role in the substance being in the creek [on Sunday].
"We will await the outcome of the test results to identify the substance and continue to collaborate with QLDC staff to identify the potential source.
"Should we identify the responsible person or persons we will consider what if any enforcement action may be appropriate."
The QLDC said CCTV footage showed the substance entering Horne Creek near the Queenstown library about 2.28pm on Sunday — the water was clear at that location about 10 minutes later as it moved down the creek, entering Lake Wakatipu beside the Queenstown Bay playground.
The council had been notified by numerous people at that stage and immediately dispatched a contractor crew to the site.
More CCTV footage was being reviewed and the council was following up on "all possibilities regarding where the substance originated from".
"We don’t have any further information on that aspect, or what further action will be taken at this stage.
"We are taking the matter very seriously and would welcome any information which would allow us to identify the source of pollution."
An update would be provided when more information was available, the statement said. — Additional reporting The New Zealand Herald
