<p>The present investigation was carried out in Poondi reservoir, Tamil Nadu, for a period of 8 months from September, 2014 to April, 2015 where the cage culture has been already initiated by the state fisheries department. The water and sediment samples were collected from the reservoir at point and non- point sources of the cage culture units and were analyzed for their physico-chemical parameters. The total microbial load, <em>E. coli</em> and feacal streptococci population were also assessed from the reservoir. During the study period, pH, sulphate, nitrate and BOD values were found within the permissible range for drinking water quality. The alkalinity values were found optimum in the reservoir water. The sediment characteristics such as pH, electrical conductivity, total organic carbon and available phosphorus values were also found to be within the standard limit. The optimum water and sediment quality characteristics and the absence of <em>E. coli</em> and feacal streptococci observed in the cage culture unit clearly showed that the small cage farming in the reservoir does not have major environmental impacts on the water and sediment quality.</p>