Lake Hawassa is the smallest lake in the rift valley of Ethiopia. Its pollution from industrial discharges has become a serious concern. The objective of this work was to assess its pollution and policy on it. Effluents contained chemical parameters that surpassed the maximum permissible limits (MPL) of EPA. The concentrations Hg, Pb, Cd, Fe and Ni in Tikur Wuha River were above MPL in drinking water due to inflowing effluent. The concentrations of these metals in the lake water were far less and below MPL in drinking water, but the level of heavy metals in the only inflowing river is a warning to the lake. Fry mortality and algal biomass varied depending on effluent source and concentration level used in the study. High fry death and algal growth were observed in textile factory effluent treatment. Earlier studies indicated that fish from the lake contained Hg, Zn, Fe, Mn and Cu, but their concentrations in the muscles of the most fished species were below the recommended MPL in human diets. The concentration of Hg in the muscles of less fished species exceeded the permissible level in human diets.