Photographs showed styrofoam-like clumps lining the shores, while the waters at a fishing village popular with tourists were seen covered in oil and rubbish.
Hong Kong comprises more than 200 islands, many with popular beaches, but there are increasing concerns about pollution and rubbish blighting the city's shores.
The government closed six beaches and hoisted warning flags after "white, oily substances" were spotted on the waters and sands off southern Hong Kong's outlying islands this morning, according to a statement.
Despite the rise of debris on beaches, washed ashore from mainland China and other parts of Hong Kong, residents in areas affected by the spillage said they have never seen anything like the congealed oil lumps.
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"It had a sort of bubbly consistency," said a resident of Lamma Island quoted by the South China Morning Post, who added the substances were strewn along the high-tide line.
Others cited a rancid smell later in the afternoon, the paper reported.
While oil spills from ships are relatively common in Hong Kong, the edible palm oil may have hazardous effects once it has absorbed toxins in the ocean, according to Gary Stokes of Sea Shepherd Conservation Society, quoted by the South China Morning Post.
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