The rapid progress and development in the aquaculture sector during the past years has made an important contribution to the overall fish production in the Philippines. In 1996, 35.4% of the total fish production or 980,857 mt came from the aquaculture sector. Although milkfish from brackishwater ponds comprise the bulk of the produce, tilapia production from freshwater aquaculture in lakes, ponds and reservoirs is increasing annually. Fish cages and fish pens proliferate in most inland waters. The operation of such structures as livelihood for the coastal inhabitants has been recognized as a profitable venture. Many have gone into tilapia culture in ponds and small experimental cages in lakes and reservoirs in the 1980's. The success of tilapia culture in cages in the Bicol Region and Magat Dam in Isabela triggered the interest of other enterprising businessmen to expand the practice to other inland waters. However, problems of mass fish kill caused by deteriorating water quality have been reported. There is a need to strictly regulate the aquaculture practices; otherwise, more problems in the aquatic environment will be encountered. As freshwater aquaculture production is intensified, negative impact on the environment is also magnified. Under the Local Government Code, the management of inland waters is within the jurisdiction of the local government units with the assistance of the national government. For the proper management and sustainable use of inland water resources, this paper highlights the positive and negative impact of aquaculture practices on the aquatic environment.