The semi-aquatic animal was caught on camera by eagle-eyed walker Sarinder Joshua Duroch, swimming along the Wyrley and Essington Canal at Bentley Bridge, Wednesfield.
Largely absent from industrial waterways for more than half a century, the otter was seen catching a fish along the stretch of canal at the rear of the Nickelodeon pub near New Cross Hospital.
A designated Local Nature Reserve (LNR) since 2008, the canal is already home to swans, Canada geese, kingfishers and a variety of other wildlife. Evidence of badgers using the towpath has also been reported recently.
Paul Wilkinson, senior ecologist at the Canal & River Trust, said: "Its wonderful to hear that one of our most enigmatic mammals has been spotted swimming along the Wyrley and Essington Canal so close to the city of Wolverhampton.
"The fact that we’re even talking about otters on formerly industrial canals is incredible and a real testament to all the hard work that so many people have put into improving the water quality in the region.
"We know we have about 10 otters with territories along our canals, and its amazing that they’re now being seen in areas where they have been absent for over 60 years.
"The canals have been transformed in recent years and this could be the first time otters have been seen on some of our waterways since the Industrial Revolution," he added.
"We’ve recently carried out our annual otter survey along the region’s canals with an amazing number of volunteers working safely across the West Midlands.
"From this survey we should be able to find out if this is an established otter territory or whether this otter was just passing through."
Councillor Phil Bateman, who campaigned for the Wyrley and Essington Canal to be made a LNR in 2007, described the sighting as “stunning news” for the city and the local area in particular.
"This is hugely exciting. Back then, I knew this overgrown and little-used canal was an asset to our community.
"Here we are in 2021 and the canal is now a much-loved and explored nature reserve. This very first sighting of an otter two miles outside the city centre is fantastic – absolutely stunning news.
"We are lucky that we have a growing army of people who have taken the reserve to heart and work tirelessly to keep it free of litter.
"The canal continues to draw huge interest with more and more people walking along it every day. And this sighting of an otter is a sign that this wonderful amenity is only going to get better,” he added.
"I have take my hat off to Sarinder for being quick enough to capture the image. It’s truly amazing to think of an otter being seen in the middle of a city that has more than 250,000 people living in it. I’m over the moon."