Industrial waste is also being dumped at unsecured municipal sites in the capital Maseru, it is claimed, where child scavengers sort through the rubbish, some of it dangerous.
"As soon as we were alerted of these issues, we immediately investigated the situation on the ground in Lesotho, commissioned an independent monitoring organisation to conduct its own investigation, and placed one of the factories involved on immediate notice until our investigation is complete," said Dan Henkle, the retailer's senior vice president of global responsibility.
Gap has long sought to present an ethically aware image, although in the past it has run into controversy over child labour allegations at its suppliers.
In the Lesotho case, the Taiwanese-owned company involved, Nien Hsing Fashion Group, said it was "urgently looking at" the issue of pollution, which has turned the water in a river near its plant bright blue. It told The Sunday Times, which said residents were suffering health complaints, that it was not previously aware of the child rubbish-pickers.
Another of the firm's customers, the jeans company Levi Strauss, said it was "disturbed" by the reports.
Lesotho, a small landlocked country with one of the world's highest HIV rates, is economically dependent on its clothing industry, which is mostly owned by Taiwanese investors who set up there decades ago.
Mr Henkle added: "In keeping with our strong and transparent history on any sourcing issues, we will continue to act swiftly, decisively and thoughtfully in doing everything possible to protect the workers at the factories that make our products and the communities in which they live and work."
