A house and a number of cars in the city's Hazelbank area have been targeted in recent days.
It is believed youths fill a drain pipe with mud before launching it like a catapult at homes and vehicles.
Sinn Féin councillor Eric McGinley has called on those involved to stop immediately.
"Apart from the mess which has been created, there is a very real danger that an accident will occur if passing cars are struck by this debris," said Mr McGinley,
"When motorists are targeted it can cause damage to the car and could scare a driver into crashing, so there are very serious implications.
"Drivers have been in touch telling us that these incidents were taking place over the weekend."
Mr McGinley made a further appeal to parents in the area to be aware of where and what their children are up to.
"These muck bombs are going to detract from the general appearance of the area," said Mr McGinley.
"So, parents need to impress upon their children the dangers of their actions.
"I've been in contact with the housing executive about this and they have given me assurances that the mess will be cleaned up as quickly as possible," he added.
A spokesperson for the Housing Executive said: "There is a tenancy at this property and a number of issues have arisen, which we are currently working to resolve.
"We have taken measures to protect our property."
Drivers are being put in "very real danger" by youths throwing so-called muck bombs in Derry, says a local councillor.