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The Orange County Health Care Agency says around 94,500 gallons of sewage spilled into the water and it was caused by a break in a main sewer line.
Laguna Beach Mayor Bob Whalen said crews were doing some routine maintenance when they ran into equipment failure, which led to the spill.
Whalen said repairs were complete by 8 a.m. Wednesday, but in the meantime, officials urge everyone to stay out of the water.
The closure covers a stretch of nearly 2 and a half miles, extending from Laguna Avenue to Blue Lagoon, the agency said.
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The affected area will remain off-limits to swimmers until the water quality meets acceptable standards.
"They're going to take about two days to do testing, so at a minimum, (the closure) will be two days," O.C. Supervisor Katrina Foley. "But we don't want anyone going into the water, because obviously if sewage is in the water, it's not safe for your health, and it could include a lot of bacteria that could cause you to get sick."
The closure means less foot traffic for nearby businesses, including C'est La Vie Restaurant and Bakery.
As for impact on marine life, staff at the Wetlands and Wildlife Center in Huntington Beach said they've taken a report Wednesday morning regarding approximately half a dozen sick birds out of Newport Beach.