Dredgers are to continue dumping at Rame Head
Divers are warning that the dumping of dredged material could spoil diving around an artificial reef off Cornwall.
Diving and tourism businesses say the former Royal Navy frigate HMS Scylla has generated £25m since being sunk in Whitsand Bay five years ago.
But they say the dumping is affecting visibility and seabed habitats.
Environment ministry Defra has licensed the Ministry of Defence to continue dumping from the River Tamar. It said it had given advice on some the issues.
The decommissioned frigate was sunk in a controlled explosion in March 2004 to become Europe's first artificial diving reef. It is 23m (75ft) below the surface in Whitsand Bay.
Devon and Cornwall's Business Council said about 7,000 boat trips had been to the wreck.
However, the new MoD licence will allow it to continue dumping material off the Rame Head disposal site, near Plymouth.
Divers said the dumping was having an effect.
Underwater photographer Dave Peake, who has been diving for 50 years, said he had seen a lot of new silt on sea beds in recent dives.
He said: "It's not completely blanketed, but, in certain areas where there should be cleaner sand, it is polluted with layers of it."
The Scylla was sunk in a controlled explosion
Some diving instructors said recent dumping meant they were not taking parties to the Scylla any more.
Warren Sallis, who runs a diving centre at Pentewan, said: "If the visibility is reduced, then people aren't going to want to go to it.
"Normally around that area visibility is 5m to 8m (10ft to 26ft), but now it's down to 2m to 3m (5ft to 10ft), with suspended matter in the water."
In a statement, Defra said that the MoD did not have to give advance warning before it dumped waste.
It added: "Advice was given by Defra at the consultation stage, before HMS Scylla became an artificial reef and diving site, that there would be visibility issues."
The MoD said the River Tamar and nearby harbours had to be dredged to keep channels clear for shipping.