The Environmental Protection Agency (EPA) is investigating "a brown coloured plume" at the Ringsend Wastewater Treatment Plant in south Dublin.
Irish Water informed the EPA on Tuesday about the discharge that was seen coming from the plant.
However the water utility reported no unusual occurrence or breakdown at the facility over the last 48 hours.
The EPA says it is investigating the cause of the plume.
In a statement, it says: "The EPA has repeatedly highlighted that Ringsend treatment plant is failing to meet national and European Union treatment standards.
"It is failing to meet these standards and failing to comply with the requirements of its waste water discharge licence because the plant is not big enough to adequately treat all of the waste water that it receives.
"Waste water discharged back into the environment from this overloaded plant is breaching, and will continue to breach, the quality standards until upgrade works are complete."
The plant has a capacity to treat waste water from a population of 1.64 million - but the load entering the plant is from a population equivalent of approximately 2.3 million.
In a statement earlier on Tuesday, Irish Water said there were "no incidents" at the plant in the last 48 hours.
"The plant is operating normally and... the wastewater is treated to the best possible standards currently achievable at the plant."
It added: "Factors such as low tidal levels, temperature of the receiving waters, the volume of wastewater discharged and wind strength and direction can increase the visibility of the treated effluent at the discharge point.
"Discolouration of the water at the discharge point may be visible on occasion until upgrade works are completed as the plant is currently overloaded.
The Ringsend plant treats approximately 40% of the country's wastewater.
Additional treatment capacity is under construction, but will not be complete until 2020.
Last week a spillage from the plant led to a swimming ban at four beaches in Dublin Bay.
It was the second time that a spillage from the facility caused the ban in June, with eight beaches closing off for a week earlier in the month.
Additional reporting: Andrew Lowth