A bird on the brink of extinction has been found living in the lower Blue Mountains, west of Sydney, but it could be under threat from a proposal to use Sydney's main water supply dam for flood prevention.

The New South Wales Government wants to raise the Warragamba dam wall, so there's extra capacity to hold water during floods.

But environmentalists say the critical breeding habitat of the Regent Honeyeater could be flooded if the dam wall is raised, further threatening the already endangered species.

Now emails viewed by AM indicate the state's Office of Environment and Heritage rejected advice from ecologists surveying the area that they needed to do more work to see how the birds would be affected by the proposal.