Pretty Bay in Birzebbuga is temporarily closed to bathers as members of the Civil Protection Department clear an oil patch in the sea and on the sand, the Department of Information said.
The case was reported to Transport Malta yesterday and, in turn, the CPD was informed to take action.
The DOI said that a large part of the beach has been contaminated.
The police are investigating the origin of the pollution.
Birzebbuga mayor Kevin Barun said in a statement the environmental disaster occurred after a container carrying speciality base fluids was hit by machinery at the Freeport on Monday and started leaking.
The council was immediately informed of the incident and steps were taken but these turned out not to be enough.
In a statement, the government said that oil was carried into the bay yesterday and following an intervention by the CPD it seemed that the situation was under control.
However, more oil was carried into the bay today even contaminating a large patch of sand.
Mr Barun said the council was in continuous contact with the CPD and would continue to work to safeguard what the people of Birzebbuga still had.
He called on anyone who suffered an inconvenience as a result of the incident to contact the council.
The council thanked the CPD for the useful work they were doing.