RESIDENTS in a Tasmanian plantation community are drinking water which kills human cells.

And the toxin in the water has been matched to the toxin in the leaves of a common and "genetically enhanced'' strain of plantation tree, Eucalyptus Nitens.

E. Nitens is sold to plantation companies around Australia.

Water from Tasmania's George River, where there are significant plantations of a hybrid strain of shining gum known as Eucalyptus Nitens, has been found by six separate laboratories to kill human cells.

Testing on nearby rivers surrounded by native forest found no toxicity.

A local GP had joined forces with a marine ecologist to help pay for research when she noticed a number of patients around the small community of St Helens had "rare auto-immune diseases''.

Former Tasmanian Forestry Minister Dr Andrew Lohrey said the water's toxicity was an "enormous issue'' and described the "hybrid'' strain of E. Nitens used in plantations as a "Frankenstein tree''.

"Three-quarters of the forest plantation estate in Tasmania is planted in these trees ... there's an export industry here to Chile and China and other states of Australia,'' Dr Lohrey said.

"There are billions of dollars involved ... this situation has come about as there is no oversight on the activities of Forestry Tasmania, they do what they like.''

He also said he suspected the tree, known in the industry as the F1, was genetically engineered but said Forestry Tasmania preferred to call it "genetically enhanced''.

Sustainable Agricultural Communities Australia director Robert Belcher called for testing on the toxicity of blue gum and plantation pine.

Gunns Forestry manager external affairs Frances Duffy called for a Government investigation into the issue.

Tasmanian director of public health Dr Roscoe Taylor did not deny foam on the George River was toxic but said drinking water was taken from offtake pipes a metre below the surface.

He said a 2004 investigation had not confirmed `"unusual rates of illness or cancers'' in the area.

Oyster farmers on the George River have complained of oyster deaths since 2004, when their entire harvest died.