PEOPLE are being asked to avoid the area after a grenade was found in the Macquarie River, near Denison Bridge, on Sunday afternoon.
Chifley Police District Inspector Adam Beard said the item was found by a fisherman, who reported it to police at about 1pm.
"About 1pm today (Sunday) a local fisherman located an item in the Macquarie River, which has since been identified as a hand grenade of military origin," he said.
Police are currently guarding the scene to ensure public safety.
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Inspector Beard said the Australian Defence Force has been contacted and when personnel arrive their role will be to make the item safe.
"It is very rusted and corroded. It appears to have been in the water for some time," he said.
"We have to consider it live until proven otherwise."
Members of the community are asked to avoid the area until it is deemed safe by defence force personnel and the police, which may not be until Monday.
"The message is to stay away from that area at this stage unless it is crucial to attend the area," Inspector Beard said.