Escherichia coli is naturally present in the intestinal tracts of warm-blooded animals. Since E. coli is released into the environment through deposition of fecal material, this bacterium is widely used as an indicator of fecal contamination of waterways. Recently, research efforts have been directed towards the identification of potential sources of fecal contamination impacting waterways and beaches. This is often referred to as microbial source tracking. However, recent studies have reported that E. coli can become "naturalized" to soil, sand, sediments, and algae in tropical, subtropical, and temperate environments. This phenomenon raises issues concerning the continued use of this bacterium as an indicator of fecal contamination. In this review, we discuss the relationship between E. coli and fecal pollution and the use of this bacterium as an indicator of fecal contamination in freshwater systems. We also discuss recent studies showing that E. coli can become an active member of natural microbial communities in the environment, and how this bacterium is being used for microbial source tracking. We also discuss the impact of environmentally-"naturalized" E. coli populations on water quality.