Otters, water voles and species of freshwater fish which had all but vanished from waterways have made a dramatic recovery following the healthiest decade for rivers since the industrial revolution.

The toxic effects of pesticides nearly wiped out the wild otter in the 1970s, but steady improvements in water quality mean their numbers are expected to make a full recovery.

Otters may already have reached their maximum capacity in parts of the south-west of England, Cumbria and Northumbria. In the past 30 years, positive sightings have risen 10-fold, says a report by the Environment Agency.

The return of wildlife in and around the waterways reflects clean-up operations by water companies and environmental bodies to meet national and forthcoming European water quality directives.

The number of serious water pollution incidents has more than halved since 2001, while major conservation programmes have protected and restored rivers, streams and lakes.

Water voles are also returning to riverbanks after serious habitat degradation in the 1990s saw the mammal become critically endangered in Britain. According to the agency, water voles have recently been spotted in 30 locations.

Fish are also now thriving in once polluted rivers. The Tyne has seen record numbers of migrating salmon, while the Thames recorded its highest number of sea trout since many species were wiped out in parts of the river by pollution in the 1830s. The agency boosted fish populations with more than half a million farmed fish, including roach, barbell, tench, dace and chub.

Water quality tests on rivers in the Thames catchment area in 2008 found that 80% were "very good" or "good", compared with just 53% in 1990. Officials have recorded 125 fish species in the Thames estuary, which is home to shellfisheries and provides nursing grounds for sole and bass.

Ian Barker, the agency's head of water, said: "Rivers in England and Wales are at their healthiest for over a century, with otters, salmon and other wildlife returning in record numbers."

Water quality will need to improve more if environmental organisations are to tackle pollution that runs into waterways from fields and roads. A further 9,500 miles of rivers and streams are due to be revitalised by the agency over the next five years.