The Environment Agency were called to Balls Hill Branch Canal on Tuesday afternoon to reports of dead fish.
The branch linked with Wednesbury Old Canal, part of the Birmingham Canal Navigations, which once served the Balls Hill Colliery.
Environment Agency manager, Roy Stokes, said: "Site controllers who attended the site and discovered 200 dead and gasping fish believe it may have been due to a loss of oxygen through algal bloom die back and a boat disturbing contaminated sediment.
"As a result we sent out operatives to aerate the water and re-oxygenate in order to prevent further mortalities.
The Canal and Rivers Trust were immediately made aware of the issue and their contractors were deployed to remove the dead fish.
"Environment Agency site controllers are now working with the CRT in assessing the site to rule out any potential further pollution."
It comes as low oxygen levels were also being blamed for the deaths of hundreds of fish in a canal in Stourport last year.