A toxic chemical linked with the use of firefighting foam has been found in the major New South Wales waterway Shoalhaven River, prompting the environmental watchdog to urge caution about the consumption of local fish.

Testing by the Environment Protection Authority (EPA) has found elevated polyfluoroalkyl and perfluoroalkyl substances (PFAS) in five species of fish in the Shoalhaven River on the state's south coast.

The EPA has urged people consuming high amounts of Luderick, Sea Mullet, Sand Whiting, Dusky Flathead and Silverbiddy caught in the river to limit their personal intake.

Its dietary advice details the number of serves of a single species that can be eaten each week.

The Department of Defence has been investigating the extent of PFAS contamination on its bases across Australia, including at the nearby HMAS Albatross at Nowra.

Map Defence Force toxic chemical contamination sites

The discovery of similar chemicals north of Newcastle prompted fishing bans in 2015, but the EPA said commercial fishing remained open for the Shoalhaven.

But EPA spokesman David Gathercole said a precautionary approach was needed.

"We're saying that people can still fish and eat their catch, but they are advised to manage the amount they eat," Mr Gathercole said.

Business as usual for local anglers

The seafood industry is a major economic driver in the Shoalhaven and is a key tourist attraction for the south coast.

Angler Steve Johnson is not too concerned about the PFAS contamination of fish in the Shoalhaven River. ( ABC News: Chloe Hart )

South coast angler Steve Johnson said he was confident fish caught from the river remained safe to eat.

"We're talking recommendations around a portion being 150 grams of a species, and the reality is most people wouldn't be consuming that much fish from this waterway on a weekly basis," Mr Johnson said.

But Mr Johnson said other popular fish species such as Mulloway, Bass and Bream also needed to be tested for the material.

"It'd be great to see more testing done on all the estuarine species in the Shoalhaven River that are commonly targeted by recreational anglers," he said.

"Just to get an idea of the extent of the possible contamination and possible impact on human consumption of those species."

Cautious optimism about river's health

Charlie Weir from Shoalhaven Riverwatch, a group dedicated to improving the health of the river, said he was not too worried about the contamination.

Mr Weir, who is considered a veteran of the Shoalhaven River, said he was cautiously optimistic there would not be any long-term risks.

"There's a lot worse than that wrong with the river as far as factory concerns and overflows from sewerage washout when it rains," Mr Weir said.

"Terrible it is, that sort of thing wants to be watched. I agree with that but I can't see any damage at the moment."