The council is facing a series of formal complaints and the prospect of prosecution because of fears it will destroy a wildlife area and jeopardise a multi-million-pound fishing industry.
Environmentalists condemned the council for countenancing "environmental madness coupled with financial folly". They are demanding the proposal is withdrawn and that the councillors responsible be "hounded out of office".
Scapa Flow was the main base for the British navy in both world wars. In 1919 the Germans scuttled 74 of their warships there to avoid them falling into British hands.
The bay is linked to the Loch of Stenness, which has been designated a Special Area of Conservation by the European Union.
Foreign tankers that use Scapa Flow must empty their ballast tanks out at sea. But to save money, the council is proposing to allow them to dump seawater collected from all around the world in the bay.
According to the Scottish Government's environmental advisers, this would risk introducing aggressive alien species that could devastate Orkney's natural environment. One recent study suggested alien species brought into the US Great Lakes by boats cost the fishing and water industries more than $200 million (£125m) a year.
"In my three decades of environmental campaigning this is one of the craziest ideas I have ever seen," said Steve Sankey, a local wildlife tourism operator who used to be the chief executive of the Scottish Wildlife Trust.
"It spells potential environmental disaster for Scapa Flow, and may not even realise the economic spin-offs the local authority is forecasting. In fact if invasive non-native species do get a hold, it could cost far, far more than it generates."
Sankey has filed complaints to Orkney Islands Council and to Audit Scotland, arguing the council has wasted up to £500,000 pursuing a plan that breaches European law. He also wrote to the Scottish environment minister, Richard Lochhead.
Sankey said: "Scapa Flow's role in both world wars was epic, and now we have a bunch of myopic councillors who want to destroy that heritage. They should be hounded out of office."
Fiona Matheson, secretary of Orkney Fisheries Association, warned that alien species introduced in ballast water could cause "a catastrophic environmental event". Orkney's £7m shellfish business is in jeopardy, she argued.
According to RSPB Scotland, alien species elsewhere in Scotland cost more than £240m a year. "Once harmful marine organisms are released in ballast water and establish populations, it is too late to prevent the damage," said the environmental group's Dr Paul Walton.
The government's Scottish Natural Heritage (SNH) and the Scottish Environment Protection Agency have both opposed Orkney's plan. "The spread of alien species in ballast water has resulted in major ecological and consequent socio-economic impacts across the globe," said an SNH spokesman.
However, Orkney Islands Council pointed out that enabling ships to discharge ballast water in Scapa Flow would reduce their costs. Councillors recently decided this is their preferred option and have commissioned investigations.
"The quality of the Orkney environment is tremendously important to this council and we are committed to ensuring that we get the best possible outcome," said Councillor Steven Heddle.
"Before a new ballast water policy is adopted, a further detailed assessment will be produced in consultation with the statutory advisory agencies and others to enable a full and informed discussion by all elected members. Only when this is complete will a decision be taken on a new policy for ballast water management in Scapa Flow."