Tests on water from the Hanjiang river in central Hubei province showed high levels of ammonia, nitrogen, and permanganate, a chemical used in metal cleaning, tanning and bleaching, according to China's Xinhua news agency.
The authorities said an investigation was under way to determine the source of the pollution.
Reports said several communities had had water supplies cut, while at least 60,000 were relying on bottled water supplies and limited underground water sources.
Vital waterway
The Yangtze river system is China's most important waterway, accounting for just over a third of China's fresh water resources and an important source of revenue for millions of fishing communities.
In April last year a study by the Chinese Academy of Sciences found parts of the 6,211km-long river had been irreversibly damaged by pollution.
The report said that billions of tonnes of industrial waste were dumped into the river and its tributaries every year, including high levels of ammonia, nitrogen and phosphorous.
In late 2006 scientists announced that the Yangtze dolphin - or baiji - had most likely been driven to extinction by heavy pollution after a month-long expedition failed to find single specimen.
Next month the annual meeting of the National People's Congress, China's parliament, is expected to hear renewed calls for a more sustainable approach to development, balanced with the need for greater environmental protection.