Although cage culture development is experiencing a rapid growth on the tropical and sub-tropical reservoir, studies of its environmental impact on aquatic ecosystem are still limited. A study was undertaken to assess the impact of cage fish farming on selected parameters of water and sediment at a medium tropical reservoir Paleru (1500 ha), Telangana, India during May 2018 to December 2018 wherein four battery of 16 cages each has been installed. Periodic observations were made on depth, transparency, temperature, pH, dissolved oxygen, electrical conductivity (EC), total hardness, calcium hardness, chlorinity, nutrients (NO3-N, PO4-P, SiO3) as well as sediment characteristics from the cage site and also from a reference site (near dam, intermediate and river site) during pre- stocking (pre-monsoon), stocking (monsoon) and post-stocking (post-monsoon) periods. The dissolved oxygen content of the reservoir water was found optimum in both at cage site (6.1 to 6.9 mg/l) and control sites (5.6 to 10.71 mg/l). Compared with reference site, transparency had reduced near cage site during monsoon may be due to increase in suspended particles. However, the pH values ranged from 9 to 9.7 at the cage site and it was 9.01-10.25 at different reference sites which is beyond the desirable limit. The alkalinity values were found optimum in the reservoir water which ranged from 100-104, 100-116, 84-98 mg/l during pre-monsoon, monsoon and post-monsoon period, respectively. Chlorides found moderate during the study, ranged in between 39 to 68 mg/l and values were higher in pre-monsoon and lower in monsoon and post-monsoon period. Not much variation was noticed with reference to the hardness at cage site and reference sites. Spatial and temporal variation was found with reference to the water nutrients status and no significant variation was found with reference to the cage sites. The sediment samples were also collected and values of characteristics such as pH, electrical conductivity, total organic carbon and available nitrogen/phosphorus were also found to be within the standard limit. Initial studies indicated no adverse effect as influenced by cage culture of fish on any of the environmental parameters studied during this short-term period, however longtime study will give the more insight about the impact of cage culture on reservoir habitat quality.