Councillors insisted the scheme was not a "snooper's charter".
Residents in north London are being offered £500 to report their neighbours who litter the pavements.
Waltham Forest is offering the cash reward for information that leads to a court conviction.
Residents are being called on to take photos on their mobile phones of anyone committing offences such as dog fouling, littering or fly tipping.
Waltham Forest Council denied that the Conviction Reward Scheme was a "snooper's charter".
Afzal Akram, a Labour councillor, said fly-tippers were becoming increasingly sophisticated in their methods.
He said illegal dumpers are removing identifying evidence such as bank statements from bin bags before leaving their rubbish behind.
"If Mrs Jones looks out of her window and sees a white van with the doors open and men dumping a sofa on the street we want her to write down the number plate and tell us," he said.
"It's not a snooper's charter, I think the message is we want our streets clean and we don't want people coming here and dumping rubbish."
If council lawyers issue a summons, officials will pay out £100, with another £50 on conviction, and £500 if the court imposes the maximum fine.