Flows from a "significant" water source for one of Sydney's dams are turning orange and disappearing beneath the surface because of an underground coal mine that is slated to expand to beneath the reservoir itself.

The Eastern Tributary, which supplies the Woronora Reservoir in Sydney's south-west, goes from pristine conditions to stagnant, highly discoloured pools within only a few hundred metres, a visit guided by WaterNSW this week revealed.

Water all but completely disappears into cracks in the sandstone bedrock above the mine.

The Planning Department says its compliance team in 2018 found "some of the performance measures" of the Metropolitan mine had exceeded approval conditions.