Southern Water has poured cash into installing new hi-tech filters at its treatment works at Thornham, Bosham and Sidlesham.
The upgrades have involved pouring millions of grains of sand into huge filter machines. The sand filters out nitrogen, which can harm the marine environment.
The improvements mean that less nitrogen will be able to leak into the sea.
Chairman of Friends of Chichester Harbour Martin Rhodes said: 'Water quality, marine life and harbour-users will benefit greatly now that these significant modifications are operational.'
John Spence, Southern Water's wastewater and environment strategy manager, said: 'The wastewater already goes through an extensive treatment process before it is released into the sea.
'However, these new, more advanced nitrogen removal processes will bring further benefits to the environment.'
Ben Green, Southern Water's senior project engineer, added: 'Improving the quality of the water we recycle back to the environment is an important responsibility for water companies and we are dedicated to continue with improvements such as this across the region.'