The PSNI has said the dressing of a republican bonfire in the Bogside with 'offensive material' is being treated as a 'hate crime.'
Police at Strand Road said: "We are receiving a number of reports regarding offensive material on the bonfire in the Bogside area of the city.
"As a police service we recognise the hurt and frustration that this can cause. The display of this material has been perceived as offensive and distasteful."
The bonfire adjacent to the Meenan Square shops is to mark the anniversary of the nationalist uprising against internment.
The PSNI said it would be 'gathering evidence' throughout the course of the evening.
"We are treating this as a hate incident and will continue to gather evidence as this evening continues.
"Where crimes have been committed and suspects identified they will be brought before the courts.
"As always we will continue to engage with local representatives throughout the night to ensure the safety of everyone in the city," said police.
Bonfires were traditionally lit in Derry and throughout Ireland in August to mark the Catholic Feast of the Assumption of Mary, and before that to celebrate the ancient harvest festival, Lúnasa.
Not 200 metres away from where the 'offensive material' on a bonfire has been reported a different and entirely unrelated event is taking place.
The Gasyard Féile is hosting a free community concert, procession and fireworks display that has been designed as an alternative to bonfires at Free Derry Corner.