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At least 20 motorists who bought diesel from a Tesco filling station in Branksome, Dorset have reported suffering engine problems.
Engine damage is reportedly running into thousands of pounds, according to some motorists.
Tesco said it was "urgently investigating" the problems.
The supermarket chain also said that initial tests on the fuel have been inconclusive, but that they have taken more samples for further testing.
Customers have been told to take receipts to the store where the fuel was purchased.
The BBC reported that one customer's Ford broke down soon after diesel was bought from the Tesco filling station.
Another driver from Bournemouth complained of a "plastic, toxic smell" after filling up his Toyota at the station on Thursday, according to the BBC.
The man said he faces a £5,000 repair bill for the damage, and that he is having difficulties running his wedding photography firm without any transport.
Other customers have taken to Twitter to complain about engine problems:
@lincnew tweeted: "New Van ruined long journey big ££."
While @johnpenfold tweeted: "car is ruined after filling up at Branksome branch. I've no car with 3 kids"
Vehicle recovery operators rarely face the issue of tainted fuel, but when it does arise it can be challenging to address easily.
The problem has come about at a bad time for Tesco, which has hit the headlines for overstating its profit guidance to the tune of £250m. The firm's share price tumbled by 11 per cent on Monday - resulting in the company losing £2bn in value.
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